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High-end fashion retailer Barneys New York has reached a deal to restructure its debts and stay out of bankruptcy court at the price of handing ownership to creditors Perry Capital and Ronald Burkle's Yucaipa Cos., the Wall Street Journal reported today The deal, disclosed yesterday, reduces Barneys' long-term debt to $50 million from $590 million by converting debt held by Perry and Burkle's investment firm to equity. Perry, the hedge fund run by Richard Perry, emerged as Barneys' new majority owner in the deal. The deal was reached in negotiations with the retailer's current owner, Istithmar World, the investment arm of state-owned Dubai World, which paid $942 million for Barneys in a buyout at the top of the market in 2007. Istithmar will retain some ownership of the chain, but it saw its Barneys stake diluted in the deal.

American Airlines, which is being eyed by rival US Airways Group for possible takeover, plans to boost international flying and increase U.S. codeshares under a plan to emerge from chapter 11 protection, Reuters reported yesterday. American parent AMR Corp is also looking to generate $3 billion in financial improvements by 2017, including cost cuts and revenue growth, it told employees in a memo on Monday. To reach $1 billion in revenue improvement, its goals include boosting international flying to 44 percent of business by 2017 from 38 percent currently. Domestic flying would drop to a 56 percent share in five years.

Arcapita Bank BSC, an Islamic-compliant fund manager overseeing about $7 billion in investments, won permission to pay employees and business partners after making changes to comply with the demands of creditors, Bloomberg News reported yesterday. Bankruptcy Judge Sean Lane approved Arcapita's requests to make payments it said are essential to running its business in bankruptcy. After negotiating some changes to the company's cash management prior to yesterday's hearing, a creditors' committee had sought Lane’s oversight to change the way Arcapita pays its employees, business partners, and insurance. Creditors and Arcapita had resolved all their disputes before the hearing began, lawyers told Judge Lane yesterday. Arcapita agreed to measures including withdrawing its application to hire Ernst and Young LLP as an adviser, and giving creditors 10 days of notice before it pays business partners.

Hostess Brands Inc., the maker of Twinkies and Wonder Bread, has been given approval by a bankruptcy judge to reject certain union contracts and modify some retiree benefits, Reuters reported yesterday. Hostess can now reject some agreements with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, as the company tries to cut crippling legacy costs associated with its pension plans and massive debt levels. However, contracts that had expired before the start of the hearing, under which the union is still operating, cannot be modified or rejected by the company, Judge Robert Drain said in court documents published on Friday.

Mark your calendars for May 23 from 2-3:30 p.m. ET for the ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar. A panel of experts will be discussing recent developments in several large complex bankruptcy cases, including Hostess, Kodak, Nortel and American Airlines. For more information and to register, please click here: http://www.abiworld.org/laborweb/index.htm.

Ally Financial Inc., the auto lender majority-owned by U.S. taxpayers, received conditional Treasury Department approval for plans to put its Residential Capital unit into bankruptcy, Bloomberg News reported yesterday. The Treasury will support the decision of directors at Ally and ResCap if they decide a bankruptcy filing is the best course of action. Chief Executive Officer Michael Carpenter is searching for ways to repay U.S. bailouts exceeding $17 billion that left the U.S. with a 74 percent stake. Administration officials have concluded that addressing ResCap's mortgage losses will put taxpayers in a better position to recoup their investment in Ally.

The judge in Washington Mutual's bankruptcy case ruled yesterday that a group of investors who are plaintiffs in a federal mortgage-backed securities lawsuit against WaMu cannot file a claim in the company's bankruptcy case until distributions are made to a group of low-ranking creditors, the Associated Press reported yesterday. The plaintiffs, whose lawsuit is scheduled for a September trial in Seattle, have asserted a claim of $435 million in the bankruptcy case and argue that they should be treated as general unsecured creditors. Washington Mutual maintains that the plaintiffs' claims must be subordinate to those of other creditor classes. WaMu also said that the plaintiffs had agreed in a previous stipulation not to file a claim unless a group of low-ranking creditors with securities fraud claims had received recoveries.

LightSquared Inc., the wireless-network company backed by billionaire Philip Falcone, received a second weeklong extension from creditors to delay a potential bankruptcy, Bloomberg News reported on Friday. The move gives LightSquared more time to negotiate before having to revisit a waiver that is keeping its debt from going into default. Before the original April 30 deadline, Falcone conditionally agreed to a request by creditors that he step down from the Reston, Va.-based company's board and executive committee.

GE Capital Corp. is weighing a pre-packaged bankruptcy for the debt issuer on a coal-fired power plant being taken back from Edison Mission Energy, spurring Standard & Poor's to cut the rating on $640 million of notes, Bloomberg News reported on Friday. Debt issued by Homer City Funding LLC for the Pennsylvania plant was reduced by two levels to CC, S&P said. General Electric Co.'s GE Capital plans to exchange the debt for new bonds that allow for interest payments to be made in cash or additional debt from Oct. 1, 2012, to April 1, 2014, according to a Securities and Exchange Commission filing on Thursday. Homer City Funding would be the entity involved in any pre-packaged bankruptcy, according to the SEC filing.

A federal bankruptcy judge in Delaware has authorized the Tribune Co. to pay up to $45 million dollars in bonuses to managers this year, the Associated Press reported on Friday. Tribune says that the proposed bonuses are reasonable and appropriate and that there were no objections from creditors. The judge will hold a hearing in Wilmington, Del., next month to determine whether to approve Tribune's latest proposal to emerge from chapter 11.

The U.S. Treasury Department agreed to sell $5 billion of shares in American International Group Inc. in a stock offering, with the bailed-out insurer buying $2 billion of the total, Bloomberg News reported today. The Treasury is selling 163.9 million shares at $30.50 each, compared with the May 4 closing price of $32.83, the department said. The transaction, the government's third offering of AIG's shares since last May, reduces the Treasury’s stake in the insurer to 63 percent from 70 percent.