NEW YORK -- Cendant Corp. settled a class action suit with investors yesterday who said the franchiser of hotels, real estate and car rentals offered securities under a misleading prospectus that contained accounting irregularities.

Holders of Preferred Redeemable Increased Dividend Equity Securities, or Prides, will receive rights to buy new Prides each valued at $17.57 more than their current Prides, Cendant said.

The new Prides will convert into Cendant common shares at a specified price in 2001. Initial terms of the settlement were announced in January.

Cendant, based in New York, owns hotel brands such as Days Inn and real estate brands such as Century 21 and is the parent of Hunt Valley, Md.-based PHH Corp. It also operates clubs that offer discount-shopping and other services to fee-paying members.

Previously, Cendant took an after-tax fourth-quarter charge of $228 million, or 26 cents a share, for costs of the settlement. The company is still defending itself in about 70 lawsuits filed by common shareholders.

Its shares have fallen 59 percent from a year ago after the disclosure that phony revenue was found in its financial statements last year, which forced it to restate three years of earnings.

Under the final settlement terms, the securities holders will also have the right to buy 4 million new Prides for cash, with the same conversion and other terms as the ones they currently have.

Cendant said the settlement will require it to issue about 19 million new common shares when the Prides convert in February 2001. That's about 2 percent more shares than are currently outstanding.

Shares of Cendant rose 87.5 cents to close at $17.5625.

Pub Date: 3/19/99