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Bankrupt wireless communications firm Lightsquared Inc. plans to go to trial with its lenders over whether Dish Network chairman Charles Ergen's acquisition of big chunks of its loan debt violated an agreement pertaining to how LightSquared can restructure, Reuters reported yesterday. The trial, announced yesterday by LightSquared and its lenders after the sides said that they could not resolve the dispute consensually, escalates a battle between Ergen and Phil Falcone, head of LightSquared owner Harbinger Capital, over control of the company. The dispute centers on a February agreement between LightSquared and an informal committee of some of its lenders governing certain aspects of LightSquared's restructuring. Key provisions of the deal have been kept private by the parties. According to court papers, the deal hinged on the lender committee being LightSquared's largest creditor constituency, which ceased to be the case, LightSquared has argued, once Ergen began buying up large chunks of the debt, thus voiding the deal.

Liquidators for two Bear Stearns Cos. hedge funds sued the three major credit-rating firms in New York State Supreme Court for allegedly misrepresenting their independence and the accuracy of their ratings, seeking $1.12 billion in damages, the Wall Street Journal reported today. The filing related to the ratings appears to be timed to beat the statute of limitations for fraud cases in New York state, which is six years, say lawyers uninvolved in the case. The rating firms—Standard & Poor's Ratings Services, Moody's Investors Service and Fitch Ratings—began their en masse downgrades of hundreds of securities backed by mortgages in July 2007. The liquidators allege that the rating firms "intentionally and knowingly misrepresented information concerning their independence, the accuracy of their ratings, the quality of their models, and the extent of their surveillance" on securities known as collateralized-debt obligations and residential-mortgage-backed securities. The lawsuit comes more than five years after Bear Stearns, a storied Wall Street investment bank, buckled under a load of mortgage-related debt. JPMorgan Chase & Co. purchased the securities firm in March 2008.

Five Mile Capital Partners LLC is accusing MSR Hotels & Resorts Inc. of using its chapter 11 case to shield its directors from possible liability for their alleged misconduct and wants an independent trustee to take charge of the company, Dow Jones reported yesterday. Five Mile, an investment firm, said that last week millions of dollars are on the line in connection with the legal claims against MSR's directors, which include breach of fiduciary duty, and it wants the company to pursue them. However, Five Mile said MSR's management has decided not to pursue the litigation, which Five Mile said is a clear conflict of interest. The investment firm said that is why it is asking a bankruptcy judge to remove MSR from chapter 11 protection and move it into chapter 7 liquidation. In chapter 7, an independent bankruptcy trustee would take charge of MSR and could evaluate whether to pursue the legal claims, which the company disputes.

The battle over LightSquared Inc. is heating up, with Phil Falcone's hedge fund Harbinger Capital accusing satellite-television mogul Charlie Ergen of fraudulently acquiring the wireless venture company’s debt in order to take control of the company on the cheap, Dow Jones Daily Bankruptcy Review reported today. In a bankruptcy filing on Wednesday, Harbinger accused Ergen of using a front company to buy up nearly $1 billion in LightSquared.

Textbook publisher Cengage Learning Inc. made its debut appearance in bankruptcy court on Wednesday, facing down a group of junior lenders who have indicated that they may challenge the restructuring deal the company reached with its top-ranking lenders, Dow Jones Daily Bankruptcy Review reported today. Although the company managed to resolve an objection from the second-lien lenders to win access to the liquidity it needs to run its business in chapter 11, the junior lenders hinted at a possible challenge to Cengage's 2007 leveraged buyout by private equity firms Apax Partners LP and Omers Capital Partners that saddled the company with more than $5 billion in debt.

Documents released today in Milwaukee show that Catholic church leaders, including then archbishop Timothy Dolan, deliberately transferred $59 million to a trust in order to protect it from the claims of people who had been sexually abused by local priests, the Huffington Post reported yesterday. In a letter to a Vatican official, Dolan, now cardinal archbishop of the Archdiocese of New York, explains that the move will provide "improved protection of these funds from any legal claim and liability." The Dolan letter, sent in 2007, is among 5,000 pages made public as part of a bankruptcy proceeding in which the $59 million trust is a point of contention for hundreds of people who have filed claims of clergy abuse. The files also include correspondence in which Dolan informs the Vatican that proposals to change statutes of limitations on sex abuse claims could adversely affect the Milwaukee archdiocese.

Global shipping company TMT Group's chapter 11 case shouldn't be allowed to move forward in U.S. courts, one of its lenders argued on Wednesday in court documents, Dow Jones Daily Bankruptcy Review reported today. "These cases do not belong in [the] United States, and these cases are not appropriate for Chapter 11 reorganization," said Chinese bank Mega International Commercial Bank Co., which is owed $415.5 million by TMT.

Lawyers for former MF Global Chief Executive Jon S. Corzine are defending his bid to have the failed brokerage's insurers pay for his legal defense, Dow Jones Daily Bankruptcy Review reported today. Corzine's legal team, along with lawyers for 25 other former MF Global executives and directors, are seeking more cash from insurers to pay for their defense costs in connection with lawsuits and government investigations stemming from the firm's 2011 collapse.

Residential Capital LLC, the bankrupt former mortgage company, will ask a judge today to approve a $2.1 billion deal with its parent Ally Financial Inc. before unveiling a report into the disputes they settled, Bloomberg News reported today. The companies and their allies among ResCap’s creditors will be in federal court in Manhattan, seeking approval of a plan support agreement that requires them to back the proposed deal. If Bankruptcy Judge Martin Glenn makes public an $80 million investigative report about ResCap’s pre-bankruptcy relationship with Ally too early, the deal could fall apart, the companies say. The settlement, reached last month, helps Ally move closer to repaying a U.S. bailout by dodging lawsuits and other claims that ResCap creditors said could be as much as $25 billion.

Bankruptcy Judge James Peck ruled yesterday that repurchase agreements don't qualify for "customer status" in a failed brokerage business, a blow to a group of banks that had sought equal footing with customers in the liquidation of Lehman Brothers Holdings Inc.'s broker-dealer, Dow Jones Daily Bankruptcy Review reported today. Judge Peck said that a "contractual obligation" by Lehman to return the securities is "no substitute" for an account statement that includes an inventory of actual securities held by the broker-dealer on the customer's behalf. The repo counterparties, he said, didn't have such statements.