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The primary industry group for the corporate loan market warned that any attempt to limit the rights of secured creditors in the event of a bankruptcy could have a broader impact on companies' access to and cost of capital, the Wall Street Journal's CFO Journal reported today. The comments by the Loan Syndications and Trading Association (LSTA) were aimed at the American Bankruptcy Institute's Chapter 11 Commission, which is currently studying the 1978 bankruptcy code for areas in need of updating. The LSTA's general counsel Elliot Ganz announced the formation of a working group on the ABI's review that any attempt to limit secured creditors' rights could limit companies' access to capital both before and after bankruptcy, because lenders will feel less protected. Robert Keach, co-chair of the ABI Chapter 11 Commission, said that the Commission has so far only identified the role of secured debt in bankruptcies as an area of study and hasn’t taken any position on the issue. "The ABI commission is certainly not looking at the prevalence of secured debt that’s occurred over the last 30 years as a problem to be solved," he said. "We mentioned it in the mission statement because there have been changes that have occurred over time that have made the current Code somewhat obsolete."

The next hearing of ABI's Chapter 11 Commission will be on Thursday, Nov. 15, at the CFA Annual Convention in Phoenix. For more information on the public hearing schedule and the work of the Commission, please click here: http://commission.abi.org/

Eastman Kodak Co. reached a deal with bondholders for $793 million in loans that could help take the onetime photography icon out of bankruptcy proceedings if it sells a collection of patents for at least $500 million, the Wall Street Journal reported yesterday. Some Kodak bondholders, however, criticized the company in court saying that it had "squandered" the 10 months it had been in bankruptcy protection by pinning its hopes on the patent sale. Bondholders including Centerbridge Partners LP, GSO Capital Partners LP, JPMorgan Securities LLC and UBS AG are providing Kodak with the new financing. Kodak's board met Sunday night to approve the package.

Bondholders who have gone unpaid by struggling Ampal-American Israel Corp. have turned to a judge for help in taking control of the company's stalled bankruptcy case, which they said is unfairly protecting Israeli billionaire Yosef A. Maiman from losing his controlling ownership in the energy and transportation holding company, Dow Jones DBR Small Cap reported today. The unsecured creditors' committee, most of whom are bondholders, wants Bankruptcy Judge Stuart M. Bernstein to let the committee's attorneys put together a plan to get the company out of chapter 11 bankruptcy protection---a plan that they say company executives have failed to make progress on since the case was filed on Aug. 29.

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.

AMR Corp.'s American Airlines was sued by a noteholder trustee that says American is required to make a payment owed to investors under the airline's plan to borrow $1.5 billion and repay debt, Bloomberg News reported yesterday. U.S. Bancorp, the trustee for $174.2 million of 13 percent secured notes due in 2016, wants a court order that American is required to pay a make-whole amount under the refinancing plan, according to court documents filed yesterday. AMR, based in Fort Worth, Texas, said in October that it is seeking court permission to borrow $1.5 billion backed by aircraft and redeem existing debt to take advantage of lower interest rates.
http://www.bloomberg.com/news/print/2012-11-08/american-airlines-sued-b…

In related news, hedge fund Marathon Asset Management has withdrawn a request for an independent investigator to examine the books of American Airlines, a unit of bankrupt AMR Corp, lawyers for the companies said at a hearing yesterday, Reuters reported. The move came after AMR agreed to preserve potential clawback claims relating to debt deals, struck between Marathon and AMR, that left American Airlines with $2.26 billion of debt. AMR entered bankruptcy last November, and is considering its options for emerging either as a standalone firm or to merge with smaller competitor US Airways Group, which is making an aggressive takeover push.
http://www.reuters.com/article/2012/11/08/amr-bankruptcy-idUSL1E8M7P9V2…

As part of the Eastman Kodak Co.'s restructuring, Bankruptcy Judge Alan Gropper recently approved ending the benefits of health insurance for life and a survivor income benefit for nearly 56,000 retirees as of Dec. 31, Reuters reported yesterday. About four years ago, retirees started to feel the pressure of Kodak's money troubles through the loss of benefits such as life insurance and dental insurance, says Roberts, who worked at Kodak for nearly 40 years as a human resources director before retiring in 2008. The benefits that remained cost Kodak $10 million a month and are listed as a $1.2 billion liability on its books.

A lawyer for investment fund pioneer Bruce Bent asked jurors on Wednesday to acquit his client of civil fraud charges, saying that the 2008 financial crisis was hard to predict, Reuters reported yesterday. Bent and his son were acting in good faith when their funds fell victim to an economic maelstrom in September 2008, attorney John Dellaportas told the jury in closing arguments in federal court in Manhattan. Closing arguments in their month-long trial had been scheduled for Oct. 29, but were delayed by Hurricane Sandy when the storm knocked out power to the federal courthouse in lower Manhattan last week. SEC attorney Alexander Janghorbani told the jury the Bents "knew they didn't have the money" to repay their investors. They "told their trustees, they told their investors, what they wanted to hear ... when they knew they couldn't deliver their promise," he said. The U.S. Securities and Exchange Commission sued Bent, his son Bruce Bent II and their family-run Reserve Management firm in 2009, saying that they lied to investors about the safety of their money after Lehman Brothers filed for bankruptcy on Sept. 15, 2008.

Fairfield Greenwich Group, the biggest operator of "feeder funds" that channeled money into Bernard Madoff's Ponzi scheme, agreed to a settlement that may pay defrauded investors as much as $80.3 million, Bloomberg News reported yesterday. The deal, to be funded by Fairfield Greenwich founder Walter Noel and other individuals associated with the firm, resolves claims by a class of investors who lost money to Madoff's fraud, according to court documents filed yesterday. Fairfield Greenwich placed about $7 billion with Madoff’s firm, Bernard L. Madoff Investment Securities LLC. The settlement, which needs a judge’s approval before taking effect, provides $50.3 million to the class, which will get an additional $30 million if that money is not used to resolve other legal claims. A provision in the agreement allows Fairfield Greenwich to cancel the settlement if too many investors opt out of the deal to pursue individual claims.

A123 Systems Inc., the bankrupt maker of electric-car batteries that received a $249.1 million federal grant, won court approval to borrow $50 million from China’s Wanxiang Group Corp., Bloomberg News reported today. Bankruptcy Judge Kevin Carey gave interim approval for the loan yesterday. Wanxiang replaced Johnson Controls Inc.as the lender for A123’s chapter 11 case. Johnson Controls said that it withdrew as the lender to avoid a fight over the financing. A123, based in Waltham, Massachusetts, filed for bankruptcy protection last month with plans to sell its automotive-business assets to Milwaukee-based Johnson Controls for about $125 million. Wanxiang said last week that it wants to be the lead bidder at an auction for A123’s assets.

The U.S. Internal Revenue Service lost its request to delay Solyndra LLC from carrying out its restructuring plan while the agency appeals a bankruptcy judge’s approval of the failed solar-panel maker’s plan to exit court protection, Bloomberg News reported yesterday. The IRS was denied its bid for a stay to keep Solyndra, which received a $535 million U.S. Energy Department loan guarantee before going bankrupt, from implementing its plan which the government claims will make its appeal moot because it would be too difficult to undo afterward. "I find that the government has failed to prove a likelihood of success," on its appeal of Bankruptcy Judge Mary Walrath's plan approval, U.S. District Judge Gregory M. Sleet said at hearing yesterday. "The government claims that the evidence clearly showed the principal purpose was tax avoidance but offers no proof to support its position," Judge Sleet added, saying that the U.S. relies on "circumstantial" evidence rather than fact.