NEW YORK (Reuters) ? Refco Inc. has asked a federal judge to approve a settlement under which it would pay more than $642 million to secured lenders, in what it called a ?key? step to concluding its nearly year-long bankruptcy.

In a filing with the US bankruptcy court in Manhattan late on Thursday, Refco said its settlement with lenders, including Bank of America Corp., would stop the accrual of $200,000 of interest per day, plus other fees.

Paying lenders ?will help ensure the availability of funds to pay other constituencies,? wrote J. Gregory Milmoe, a lawyer representing Refco, and Edwin Smith, who represents the trustee for Refco?s asset-rich offshore unit, in a joint filing.

Refco filed for Chapter 11 protection from creditors last October 17, a week after revealing that former chief executive Phillip Bennett hid $430 million in debt.

Bennett has pleaded innocent to fraud charges. The bankruptcy remains one of the largest in US history. Refco has sold some assets to pay creditors, who have recovered only a small fraction of the $16.8 billion they said Refco owed.

Under the lender settlement, Refco would pay the $642 million representing outstanding principal, accrued interest, and up to $13.5 million of loan fees.

It would also turn over money it receives from Austrian bank Bawag, which is paying $675 million to settle charges it helped Refco commit fraud.

In exchange, Bank of America would drop claims that Refco gave it misleading financial data related to the loans, the joint filing shows.

Charlotte, North Carolina-based Bank of America did not immediately return a call seeking comment.

The proposed settlement is separate from amounts that the Refco Capital Markets Ltd. offshore unit, which ended July with $2.4 billion of assets, would distribute.

Under a proposed settlement negotiated by trustee Marc Kirschner, Refco Capital Markets would repay customers owed about $2.7 billion about 70 cents on the dollar, and unsecured creditors owed $890 million about 26 cents on the dollar.

Kirschner on Thursday sued to stop Refco from interfering with Refco Capital Markets? assets. Failure to agree on a distribution plan might result in the unit?s liquidation.

Hearings before US Bankruptcy Judge Robert Drain are set for September 12 on the status of overall settlement talks, and for September 27 on the proposed lender settlement.

Refco shares closed on Friday unchanged at 40 cents in Pink Sheets trading. Its 9 percent notes maturing in Aug. 2012 traded up 0.625 cents on the dollar at 81.25 cents, according to NASD bond pricing service Trace.