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CPI Corp., the troubled St. Louis-based operator of portrait studios, filed for bankruptcy yesterday, nearly a month after closing all its U.S. locations, the St. Louis Post-Dispatch reported today. In its chapter 7 bankruptcy filing in Delaware, where the company is incorporated, CPI listed $10.4 million in assets and $135 million in debt. CPI was already in default with lenders when it closed all its U.S. studios in Walmart, Sears and Babies R Us stores last month. Before shuttering some under-performing stores in recent years, CPI had more than 2,700 locations in the U.S. and Canada. CPI spun off its Canadian operations last month, and a receiver was appointed by the Superior Court of Justice in Ontario for the 358 Canadian stores. The company is also facing a lawsuit from angry ex-workers who are seeking back vacation pay. The lawsuit, which seeks class-action status, also alleges that CPI failed to comply with the federal Worker Adjustment and Retraining Notification (WARN) Act.

A court fight over more than $7 billion raised for bondholders and other creditors of Nortel Networks Corp. will be delayed unless a judge finds that European units of the defunct telephone maker filed a “frivolous” appeal, company lawyers said yesterday, according to Bloomberg News. The European units want to ask a federal appeals court in Philadelphia to force all sides into private, binding arbitration. The units, known as the EMEA debtors, plan to appeal a decision by U.S. Bankruptcy Judge Kevin Gross in Wilmington, Del., rejecting arbitration and scheduling next year’s court fight over how best to divide the cash. Once filed, the appeal may prevent parties from preparing for the court fight until the appellate panel rules, causing a delay, according to James L. Bromley, Nortel’s lead U.S. bankruptcy attorney. Nortel’s U.S. unit and its U.S. bondholders and creditors want Judge Gross to declare the appeal frivolous, a finding that would allow preparations for next year’s court fight to start. Based in Mississauga, Ontario, Nortel filed for bankruptcy in Canada, the U.S., the U.K. and France, with various units under the control of separate teams of lawyers and under the jurisdiction of different courts. The case is Nortel Networks Inc., 09-bk-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Ally Financial Inc. says Residential Capital LLC's creditors "cannot come close" to proving that Ally is responsible for the liabilities in ResCap's bankruptcy case, the Wall Street Journal reported today. Ally said in a court filing that at the very least, the creditors' bid to sue it on behalf of ResCap is premature, and the contention that Ally "pierced the corporate veil" in its dealings with subsidiary ResCap will be a difficult case for creditors to win. Last month, ResCap's unsecured creditors' committee sought the right to sue Ally over its relationship with ResCap, saying that it thought Ally could be on the hook for all $20 billion to $25 billion in ResCap's liabilities. When the ResCap bankruptcy case began last spring, Ally had proposed to pay $750 million to ResCap's estate as long as it was released from liabilities. Creditors have consistently balked at that number, throwing the case into uncertainty.

Bankrupt Lehman Brothers Holdings Inc. sued Intel Corp., alleging that the world’s largest semiconductor maker breached a $1 billion swap agreement, Bloomberg News reported yesterday. Under a 2008 accord, Intel gave $1 billion to Lehman’s over-the-counter derivatives unit in August of that year in exchange for 50 million shares of its stock, to be delivered on Sept. 29, 2008, according to a complaint filed yesterday in the U.S. Bankruptcy Court in Manhattan. Lehman posted $1 billion in cash collateral to Intel as part of the deal, which specified that in the event of early termination, Intel would be compensated for its losses. Intel ended the deal two weeks after Lehman filed for bankruptcy protection on Sept. 15, 2008, and seized the $1 billion in cash collateral and has refused to return it, even though its losses on the swap were “far less than $1 billion,” lawyers for Lehman said in the complaint. Lehman filed the biggest bankruptcy in U.S. history in September 2008, listing assets of $639 billion. The case is Lehman Brothers Holdings Inc. v. Intel Corp., 13-1340, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Bankruptcy Judge Shelley C. Chapman yesterday approved Ambac Financial Group Inc.'s settlement with the Internal Revenue Service over the very tax issues that helped tip the bond insurer into its November 2010 bankruptcy, inching Ambac toward emerging from chapter 11 protection, Dow Jones Newswires reported yesterday. The approved settlement calls for Ambac to pay the IRS $101.9 million to settle claims over how the company accounted for credit default swaps in the years before its bankruptcy filing. The IRS had claimed it was owed $802 million, and while the two sides agreed to many of the terms of the settlement last year, the agreement was finally consummated earlier this month.

The Supreme Court declined yesterday to hear a challenge to the post-bankruptcy reorganization of Charter Communications Inc., Reuters reported yesterday. Law Debenture Trust Co. of New York and R2 Investments objected when the No. 4 U.S. cable television operator filed for chapter 11 protection in March 2009, emerging in November of that year with its debts trimmed by $8 billion, or 40 percent. The bankruptcy was viewed as a major setback for Microsoft co-founder Paul Allen, a major investor. The objectors sued Charter, its affiliates and Allen himself because they said that they were left out of the reorganization negotiations between the company, Allen and other key investors. LDT was a trustee for holders of $479 million in bonds, while R2 was a stockholder. LDT was told it could recoup 32.7 percent of its claims, while R2 would receive nothing, according to court papers.

Bankruptcy Judge Sean Lane has approved two antitrust settlements between American Airlines Inc., Orbitz Worldwide Inc. and Travelport Ltd., ending a two-year legal battle, the Dallas Morning News reported today. In April, American and Orbitz settled their legal dispute over ticket distribution. In March, American settled claims that Travelport colluded with other reservation systems to stifle competition in providing flight data to travelers and agreed to a new distribution agreement. Both settlements required approval of the bankruptcy court in American and its parent AMR Corp.’s chapter 11 reorganization. Terms of the settlements were not released, and Judge Lane granted AMR's request to seal the settlements and Travelport agreement and redact the confidential information from the Travelport agreement,” according to court documents filed on Thursday.

Ambac Financial Corp. has agreed to a deal with creditors that will bar Charles Lemonides, who the bond insurer accused of "offensive" conduct, from serving on the company's board after it exits bankruptcy, Reuters reported on Friday. Lemonides is the chief investment officer for asset manager ValueWorks LLC and served as a member of Ambac's creditors' committee, which nominated him to serve as a director of a reorganized Ambac. The settlement is confidential. The parties said in a court filing the Bankruptcy Code gives Bankruptcy Judge Shelley Chapman the power to protect someone from the disclosure of scandalous or defamatory information.

Patriot Coal Corp., the bankrupt mining company, reached a settlement resolving how it will reduce benefits for nonunion retirees, Bloomberg News reported yesterday. Patriot will pay $4 million into a plan administered by a trustee to pay benefits for nonunion workers, Brian Resnick, a lawyer for Patriot, said in court yesterday. The payment would consist of $250,000 in cash plus stock in a reorganized company, he said. Life insurance will be capped at $30,000 and current benefits will stay in effect until July 31 under the settlement.

The former chairman of Dewey & LeBoeuf has agreed to pay more than half a million dollars in a proposed settlement with Dewey's trustee and insurer to resolve claims that bad management led to the law firm's demise, Reuters reported yesterday. Former Dewey Chairman Steve Davis has agreed to pay $511,145 to settle claims that he mismanaged Dewey & LeBoeuf, which last May became the largest law firm in U.S. history to file for chapter 11 bankruptcy. XL Specialty Insurance Co, which issued Dewey's management liability insurance policy, has agreed to pay $19 million in the proposed settlement, according to court documents. If the settlement is approved, Davis would pay less than other former Dewey partners to be released from claims related to the firm's demise.