%1

Hostess Brands Inc. will proceed with a plan to go out of business after the maker of Twinkie snack cakes said that last-minute talks with striking workers broke down yesterday, Reuters reported. Hostess and its striking bakers union were pressed by Bankruptcy Judge Robert Drain into mediation to try to end the walkout and save the company and its 18,500 jobs. Hostess, which also makes Wonder Bread and Drake's cakes, will ask Judge Drain to approve a plan to begin a piece-meal lidquidation of the 82-year-old company. It has said that its operations were crippled by the bakers' strike and that winding down is the best way to preserve its dwindling cash.

Hostess Brands and one of its major unions agreed yesterday to a mediation session, in a last-ditch effort to avoid winding down the bankrupt maker of Twinkies and Wonder bread, the New York Times DealBook blog reported yesterday. The company and the union agreed to mediation at the behest of Bankruptcy Judge Robert D. Drain. The talks may also include representatives of the Teamsters union and the company’s lenders. Should the talks collapse, lawyers for Hostess will be back in court on Wednesday morning to seek approval of a close-out plan.

A trustee representing equipment noteholders who are owed $1.2 billion is suing AMR Corp. to block the American Airlines parent from refinancing the notes without covering certain early-repayment fees, Dow Jones Newswires reported yesterday. The lawsuit filed Friday joins a similar adversarial suit filed in early November by the representative of $174.2 million in secured notes. AMR is trying to refinance a total of $1.3 billion in equipment notes and to avoid this fee on all of those notes. U.S. Bank National Trust Association, in a complaint filed as part of AMR's chapter 11 case, said that AMR's request to refinance the notes with $1.5 billion in new financing is purely to take advantage of the favorable credit market. The refinancing has nothing to do with AMR's bankruptcy filing, it said, and the company's attempt to avoid paying certain obligations to noteholders violates the terms of the indenture agreement.

Citigroup Inc. has agreed to pay $360 million to the brokerage estate of Lehman Brothers to resolve a dispute over $1 billion in collateral that the investment bank was forced to post in the days leading up to its bankruptcy in 2008, Reuters reported yesterday. According to a settlement reached on Friday with the trustee liquidating Lehman Brothers's U.S. brokerage unit, Citigroup will also relinquish its claim to $75 million that was contingently paid to the estate at the beginning of the liquidation, court documents showed. The trustee, James Giddens, filed the claim against Citigroup and its subsidiaries early last year, arguing that the $1 billion was obtained under coercion and that the amount should be part of a general asset pool to be divided among creditors in accordance with bankruptcy law.

The bankruptcy trustee recovering money for victims of the Ponzi scheme operated by imprisoned Minnesota businessman Tom Petters is suing BMO Harris Bank, accusing it as the owner of M&I Bank of aiding and abetting the fraud, the Associated Press reported yesterday. The lawsuit filed in bankruptcy court in yesterday accuses the formerly Milwaukee-based M&I Bank of turning a blind eye to $35 billion that flowed in and out of the main bank account that Petters Company Inc. used to finance the $3.65 billion Ponzi scheme for more than five years.

Bank of New York Mellon Corp.'s Ivy Asset Management agreed to a $210 million settlement with the state of New York to resolve allegations it misled clients that invested with Bernard Madoff, Bloomberg News reported yesterday. Ivy, which reached the agreement with New York Attorney General Eric Schneiderman, was sued by the state in 2010, accused of concealing from investors negative information it learned about Madoff in order to keep collecting fees. Ivy was paid more than $40 million between 1998 and 2008 to give advice and conduct due diligence for clients with large Madoff investments, according to the attorney general’s office. Ivy's clients lost more than $236 million after Madoff's Ponzi scheme collapse, the office said.

A group of creditors owed millions of dollars by Dewey & LeBoeuf LLP is seeking to sue its former top three managers, saying that the trio "engaged in rampant self-dealing" that led to the law firm's demise, the Wall Street Journal reported today. The move comes from the company's unsecured creditors' committee—staffing agencies, car services and other trade creditors that extended credit to Dewey. Those unsecured creditors, which also include federal pension regulators, have filed up to $500 million in claims against the failed law firm and are unlikely to recover all the money they are owed. The request to pursue claims against Dewey's former leaders, filed on Monday, seeks to recover money from about $50 million in management-liability coverage and other insurance policies held by the law firm. A hearing on the unsecured creditors' motion is set for Nov. 29.

Hostess Brands Inc., the bankrupt maker of Twinkies and Wonder Bread, said that it will have to liquidate itself and lay off most of its workforce in case of a widespread strike, Reuters reported on Friday. Members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union said that its members at some Hostess bakeries have gone on strike in response to court-approved pay cuts. The company, which employs 18,300 people, said that it will focus on selling its assets to the highest bidders if more workers choose to go on strike at other locations in the coming days.

U.S. District Judge Harold Baer on Thursday ruled that Eastman Kodak Co. executives did not mislead investors about the photography pioneer's deteriorating financial health in the year prior to its bankruptcy, Reuters reported on Friday. Judge Baer dismissed a shareholder lawsuit against Chief Executive Antonio Perez and three former Kodak executives. The Rochester, N.Y.-based company was not a defendant because it is in chapter 11. Shareholders led by Bret Jones, who claimed to have lost $720,384 by investing in Kodak stock, accused the company of making false and misleading statements that suggested optimism it would become profitable, maintain sufficient liquidity, and sell a digital patent portfolio once thought to be worth as much as $3 billion.

Krones AG, a German maker of packaging and bottling machines, will pay $125 million to settle a U.S. criminal probe and related civil litigation over its role in a $685 million fraud at Le-Nature's Inc, a bottled water company that went bankrupt in 2006, Reuters reported yesterday. The U.S. Department of Justice said Krone's U.S. unit, Krones Inc, will pay $15 million and enter a non-prosecution agreement to resolve the criminal probe. The Franklin, Wisconsin-based unit will also pay $110 million to enable fraud victims and Le-Nature's creditors to recover some of their losses.