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Ambac Financial Group Inc. reported a profit in its first reporting period after emerging from bankruptcy protection in early May, helped by sharply lower costs, MarketWatch.com reported yesterday. The bond insurer, which sells protection on mortgage securities, filed for chapter 11 bankruptcy protection in late 2010 after the Internal Revenue Service questioned the accounting that allowed the company to receive more than $700 million in tax refunds. The company completed its financial restructuring and came out of bankruptcy protection on May 1. Under the terms of the restructuring, all allowed claims of Ambac's former creditors were discharged and those creditors received new stock, and in some cases, new warrants, issued by the reorganized company. All stock of the company that existed prior to Ambac's emergence from bankruptcy was canceled. For the two-month period from May 1 to June 30, the newly emerged company reported a profit of $205.7 million. The predecessor company posted a loss of $811.1 million during the second quarter a year ago.

Patriot Coal Corp. says that its new labor settlement with its miners' union and retirees will save it about $130 million annually, or $20 million less than the mining company had previously targeted, Dow Jones Daily Bankruptcy Review reported today. Patriot disclosed the cost-savings projections, along with new details on the labor terms, in its request for the U.S. Bankruptcy Court in St. Louis to approve the settlement it reached on Monday with the United Mine Workers of America.

The Justice Department, along with the attorneys general of six states and the District of Columbia, filed a lawsuit yesterday seeking to block the proposed merger of American Airlines and US Airways, the New York Times DealBook blog reported yesterday. Dealing an unexpected blow to a yearlong effort to create the world’s biggest airline, the Justice Department said that the merger between the two airlines would substantially reduce competition, increase air fares and cut service to travelers. After approving a series of mergers between the nation’s airlines in recent years, the Justice Department’s decision came as a surprise to both carriers, who had expressed confidence the deal would go through with only a few changes. Antitrust regulators had not challenged an airline merger since the planned tie-up between United Airlines and US Airways in 2001. In recent years, however, consumer groups and some economists have warned that the wave of consolidation in the airline sector had contributed to higher airfares and less choice for consumers. The civil antitrust lawsuit to challenge the planned deal was filed in the United States District Court for the District of Columbia. The Justice Department said the vast majority of domestic airline routes were already highly concentrated. A merger of American and US Airways, it said, would result in four airlines controlling more than 80 percent of the United States market for commercial air travel.

Government lawyers have moved to block Exide Technologies Inc. from abandoning miscellaneous assets, arguing that the troubled battery maker can't walk away from its duty to clean up contaminated sites, Dow Jones Daily Bankruptcy Review reported today. The U.S. Environmental Protection Agency invoked laws protecting public health and safety to argue against a blanket court order authorizing Exide to scrap "de minimis" assets it no longer needs or sell them without all the formalities of a bankruptcy sale.

U.S. District Judge Denise Cote said that the Federal Housing Finance Agency (FHFA) may pursue a fraud lawsuit against Ally Financial Inc even though Ally's Residential Capital LLC mortgage unit is in bankruptcy, Reuters reported yesterday. Judge Cote said that the lawsuit is unlikely to have an "immediate adverse economic consequence" for ResCap's estate, such that it would be subject to an automatic stay under the U.S. Bankruptcy Code. Ally is among 18 defendants that the FHFA sued in 2011 for allegedly making false or misleading statements in documents relating to residential mortgage-backed securities bought by Fannie Mae, Freddie Mac or both. FHFA, the conservator for both Fannie and Freddie, sued Ally to recoup losses on the sale of more than $6 billion of securities to Freddie Mac between September 2005 and May 2007. Fourteen of the 15 pending FHFA lawsuits are before Cote. Three others ended in settlements, including a $885 million accord last month with Swiss bank UBS AG.

The nation's biggest miners' union and Patriot Coal Co. say they have reached a potential settlement over the severity of wage and benefits cuts a bankruptcy judge had allowed the company to impose, the Associated Press reported yesterday. The United Mine Workers of America isn't publicly revealing details of the deal, pending Friday's scheduled ratification vote by its members. St. Louis-based Patriot also isn't releasing the terms. However, the union says the deal significantly improves upon the cuts Patriot was empowered to make under the May 29 court ruling that allowed it to abandon its collective-bargaining agreements with the union.

After an early summer slowdown, the Dewey & LeBoeuf bankruptcy docket is beginning to hum again, with the defunct firm's liquidation trustee filing a slew of suits on Friday seeking the return of $5.7 million paid to Bank of America, several law firms, and various other vendors in the 90 days before Dewey sought chapter 11 protection, Am Law Daily reported on Friday. The dozen preference actions represent just the first wave of such litigation, says Minnesota lawyer Joseph Steinfeld, whose firm, ASK LLP, filed the Friday suits on behalf of Dewey liquidation trustee Alan Jacobs. Steinfeld says that his firm is handling 25 preference cases that Jacobs' counsel at New York firm Hahn & Hessen couldn't bring because of conflicts, and that the ultimate number of cases to be filed will be much higher. Some similar claims are being resolved outside of court, he says.

Against criticism from the U.S. government's executive-bonus watchdog, attorneys for American Airlines's parent company defended the $20 million severance payment promised to departing Chief Executive Tom Horton, arguing that the bill would be paid once the company merges with US Airways Group Inc., Dow Jones Daily Bankruptcy Review reported today. In court papers filed on Thursday, attorneys for AMR Corp. argued that the company has the power to promise the severance payment to Horton as part of its chapter 11 reorganization plan because the payment money would come from "the surviving entity of the merger with a new asset base."

Two Brooklyn hospitals that are in danger of closing—Interfaith Medical Center and Long Island College Hospital—got some breathing room thanks to recent court actions, Crain's New York Business reported on Friday. The postponement of an Aug. 15 hearing to Aug. 26 means that Interfaith will stay open at least a few more days. Its closure plan had been scheduled to be reviewed by the U.S. Bankruptcy Court for the Eastern District of New York next week. Interfaith, based in Bedford Stuyvesant, Brooklyn, had intended to start its closing plan Aug. 15. That implementation will be delayed to Aug. 26, depending on the court's ruling.

Mortgage lender Residential Capital LLC is facing a number of objections from the U.S. Trustee Program, its pension insurer and other creditors to the outline of its plan to exit bankruptcy protection, Dow Jones Newswires reported on Friday. U.S. Trustee Tracy Hope Davis took aim at "impermissible payments" earmarked for some bondholders' and investors' lawyers and financial advisers, in a court filing on Thursday. Davis is also concerned about the broad releases from civil lawsuits granted to Ally Financial Inc. and its managers as part of its bankruptcy deal with its mortgage subsidiary. Ally, which isn't under chapter 11 protection, has agreed to pay $2.1 billion to its mortgage subsidiary and its creditors in return for protection from litigation over ResCap's mortgage business. The broad scope of those releases has caught the attention of several U.S. government officials.