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Lehman Brothers Holdings Inc. has won more support for a proposal to pay at least $1 billion to investors holding soured mortgage debt, deepening a divide with hedge funds opposing the bankruptcy deal, the Wall Street Journal reported on Saturday. Officials representing 244 mortgage-backed securities trusts have largely accepted a settlement offer on Thursday that puts a floor of $2.4 billion, subject to a judge’s approval, on claims against the Lehman bankruptcy estate over alleged underwriting failures. The proposed deal provides a path for Lehman to resolve a long-running dispute that has dogged its bankruptcy proceedings over how much it owes for faulty mortgages packaged and sold to investors before the financial crisis. The trustees — U.S. Bank National Association, Deutsche Bank National Trust Co., Wilmington Trust Co. and TMI Trust Co. — accepted the settlement for all but five of the trusts at issue. In addition to the trustees, 14 institutional investors including BlackRock Financial Management Inc., Pacific Investment Management Co. and Goldman Sachs Asset Management LP that hold certificates issued by the trusts also support the settlement.

Discount retailer Payless ShoeSource is investigating whether its leveraged buyout by private equity firms and the dividend payments they received led to its bankruptcy, according to court papers, Reuters reported yesterday. The company disclosed its investigation on Wednesday in a filing aimed at persuading Bankruptcy Judge Kathy Surratt-States in St. Louis to reject a request by an official committee of creditors to hire an expert to review pre-bankruptcy transactions. Creditors have said in court filings that San Francisco private equity funds Golden Gate Capital and Blum Capital, which together hold 98.5 percent of the company and control its board, received more than $350 million in dividends in recent years. Payless, which has 4,000 stores around the world, said in court papers that a separate investigation could hinder its goal to recapitalize and emerge from bankruptcy in August.