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Lehman Brothers Holdings Inc. filed a lawsuit on Dec. 23 against Saint Louis University, the counter party on five interest-rate swaps at the start of Lehman’s bankruptcy in 2008, Bloomberg News reported on Friday. According to Lehman, the university terminated the swaps early and paid Lehman about $25 million. Lehman contends the university calculated the termination payment in a commercially unreasonable manner and wants $17.5 million more. To calculate the termination payment, Lehman said the university solicited offers from nine swaps dealers to step into the bank’s shoes on the swaps. Lehman claims the bids SLU received were below market because the university made it clear the dealers wouldn’t be required to enter into actual swap agreements.

The back-up bidder for Revel AC Inc., now having the right to buy the shuttered Atlantic City, New Jersey, casino, wants the bankruptcy judge to cut the $95.4 million purchase price by $8.4 million in view of alleged improprieties in the auction process, Bloomberg News reported today. The purchase price for the casino’s assets should be $87 million, not the $95.4 million offered by Glenn Straub’s Polo North Country Club Inc. at an auction, Polo North said in a Dec. 24 court filing. Revel decided to proceed with a sale to Polo North after Brookfield Property Partners LP terminated a contract to buy the property for $110 million. When the bankruptcy court in Camden, N.J., approved the sale to Brookfield, the judge anointed Straub as the backup bidder to buy the project at his last offer of $95.4 million if the higher sale fell through, which it did. A hearing on the sale is scheduled for Jan. 5, when Straub wants the court to cut the purchase price.

A bankruptcy judge cleared NII Holdings Inc.’s top executives to potentially earn millions of dollars in bonuses, telling a federal watchdog that its objection to the payout plan “completely stunned” her, the Wall Street Journal reported today. Bankruptcy Judge Shelley Chapman yesterday authorized the Latin American Nextel carrier to pay its executives and senior managers bonuses tied to the company’s performance and the success of its chapter 11 case. The targeted total payout is approximately $9 million, though that could rise or fall depending upon how the company does. Before approving the plan, Judge Chapman questioned why a government attorney was objecting to the bonuses, which she called “a classic incentive program.”

Years of contamination at a Southern California lead-acid battery-recycling plant caused severe health problems for local residents, including cancer and kidney failure, according to a new lawsuit, Dow Jones Daily Bankruptcy Review reported today. The suit, brought against directors and officers of Exide Technologies, was filed on Monday in Los Angeles Superior Court. Plaintiffs attorney Robert Mandell said yesterday that the suit is one of five that he and three other lawyers plan to bring related to the alleged effect of an Exide plant in Vernon, Calif. The group's 475 clients include children and adults who say they became ill from exposure to lead and arsenic used at the plant, as well as the families of roughly a dozen people who have died from apparent exposure.

Bankruptcy Judge Mary Walrath yesterday tied up a remaining loose end from the 2008 collapse of Washington Mutual Bank, endorsing a $37 million settlement of the company’s claims against its former leaders, the Wall Street Journal reported today. Regulators seized the troubled subprime lender and sold it to JPMorgan Chase & Co. The settlement approved Tuesday ends some of the litigation over who was to blame for Washington Mutual’s failure including legal fights with insurance companies that balked at paying. Among other things, the settlement could free up about $18 million that has been held in reserve in the event the bankrupt company was required to cover the defense fees and costs of sued executives.

Some of the country’s top restructuring professionals who contributed to the final report of the ABI Commission to Study the Reform of Chapter 11 released earlier this month made it clear that, aside from strengthening tools for a bankrupt company, they want to make the process cheaper, according to a post yesterday on the Wall Street Journal Bankruptcy Beat blog. “Bankruptcy has always been expensive, and there has always been an effort to rein in excessive costs,” said Prof. Kenneth Klee, who helped engineer the 1978 overhaul and was a member of the Commission. The Commission’s recommendations propose to clarify rules on dozens of issues on which bankruptcy judges have disagreed, giving lawyers — in theory — less to fight about. Two proposals address a big reason why costs can spiral upward: Bankrupt companies have to pay the legal bill for others. Besides their own bankruptcy lawyers, investment bankers, financial advisers, accountants and public relations firms, bankrupt companies are legally obligated to pay the bills of the creditor committee that forms to advocate for vendors, employees and other unsecured creditors. (Subscription required.)
http://blogs.wsj.com/bankruptcy/2014/12/22/proposed-bankruptcy-fixes-wo…

To read a copy of the Commission’s final report and its recommended principles on professional compensation, please click here: http://commission.abi.org.

The Catholic Diocese of Spokane, Wash., can take its legal malpractice claim to trial against a law firm that handled its 2007 bankruptcy over priest sex abuse claims, a federal bankruptcy judge ruled, the Associated Press. The decision on Wednesday means former Spokane bishop Blase Cupich, who now serves as archbishop of Chicago, will likely have to testify in February about his decision to seek $3.6 million in legal fees from the Paine Hamblen law firm. Bishop Cupich contends that Paine Hamblen lawyers underestimated how many victims would come forward with sex abuse claims after the bankruptcy was first resolved. A $1 million fund was created to handle future claims, based on Paine Hamblen's estimates of how much it would cost the diocese to settle the allegations. But the fund was quickly depleted, raising the prospect of foreclosure on some Catholic parishes that had been put up as collateral. In documents submitted to the court, Bishop Cupich said he believed Paine Hamblen bungled the bankruptcy. The bankruptcy was settled before Bishop Cupich became bishop of Spokane.

Several major broadcasters refused to back down Friday from attempts to control when and to whom bankrupt Aereo Inc. can sell its technology, Dow Jones Daily Bankruptcy Review reported today. Facing an impasse between the failed TV-streaming service and broadcasters including CBS Corp., Walt Disney Co.'s ABC, Comcast Corp.'s NBC and 21st Century Fox Inc.'s Fox, Bankruptcy Judge Sean Lane held off on approving a proposal outlining how Aereo plans to sell its assets. As of Friday afternoon, Aereo and broadcasters were privately discussing ways to resolve differences on the sale process, including at what point Aereo can begin deleting its servers and how much time broadcasters would have to oppose any prospective buyers.

LightSquared, the bankrupt wireless venture owned by Phil Falcone's Harbinger Capital Partners, on Thursday submitted a new restructuring plan under which Harbinger would hold onto a sizable stake in the company, Reuters reported yesterday. The plan is the latest in a string of so far unsuccessful restructuring efforts as Harbinger wrangles for control of LightSquared with its largest creditor, satellite mogul Charles Ergen. Throughout LightSquared's two-and-a-half-year journey in chapter 11, the company and creditors have advanced various proposals to fund its exit, some including Harbinger and others all but eliminating it from the capital structure. The latest would give Harbinger a 44 percent equity stake in a reorganized LightSquared, but no board membership or control over day-to-day operations. Fortress Investment Group and Centerbridge Partners, both LightSquared investors, would own 26 percent and 8 percent, respectively. Ergen's $1 billion chunk of LightSquared's loan debt would be repaid via notes.

A $1 billion pact between Nortel Networks Corp.'s U.S. unit and bondholders won court approval Thursday over the protests of the one-time Canadian technology giant, the Wall Street Journal reported today. The ruling from Bankruptcy Judge Kevin Gross means distressed-debt investors could stand to recover as much as $5 billion from Nortel’s collapse in 2009, including more than $1 billion in interest on $4 billion worth of debt. The Canadian parent company tried to derail the deal between Nortel U.S. and bondholders, arguing the settlement was the product of a defective process. The U.S. unit defended the settlement as a compromise on a claim for interest that could have reached $1.6 billion.