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A plan by American Airlines' parent to exit bankruptcy and merge with US Airways Group is coming under fire from the U.S. Department of Justice over nearly $20 million in severance pay earmarked for outgoing CEO Tom Horton, Reuters reported on Friday. U.S. Trustee Tracy Hope Davis said in court papers on Friday that the severance deal for AMR Corp's chief executive violates bankruptcy law. The initial merger agreement called for $19.9 million in severance payments for Horton, but when Judge Sean Lane approved the merger at a hearing in March, he refused to green-light the severance package, saying that it was a matter that should be left for AMR's chapter 11 exit plan. Davis at the time had opposed the severance on grounds similar to those she cited on Friday.

AMF Bowling Worldwide Inc. won court approval to send its chapter 11 plan, which calls for its merger with upscale bowling alley chain Bowlmor, to its creditors for a vote, Dow Jones Daily Bankruptcy Review reported today. Creditors must cast their votes by June 20, court papers show, so that Bankruptcy Judge Kevin R. Huennekens may consider confirming the plan at a June 25 hearing. Under the restructuring plan, AMF would merge with Bowlmor to create a new company that would be known as Bowlmor AMF.

Pittsburgh Corning Corp.’s bankruptcy judge overruled final objections by insurance companies trying to halt the reorganization of the building-supply company, Bloomberg News reported on Saturday. Bankruptcy Judge Judith Fitzgerald in Pittsburgh refused on Friday to reconsider her initial approval of the reorganization plan, which relies partly on insurance proceeds to pay victims of asbestos exposure. Last week, insurers led by Mt. McKinley Insurance Co., asked Judge Fitzgerald to reconsider her decision, claiming that she erred on May 16 when she tentatively approved a plan to create a $3.5 billion asbestos trust. The trust and the plan now go before a U.S. district court judge for a second approval, which is required for all asbestos-related bankruptcy cases that create a victim’s trust fund. Under the bankruptcy plan, Pittsburgh Corning’s parents, Corning Inc. and PPG Industries Inc., may shift their liability for asbestos claims to the trust, which the companies and the insurers would fund. Corning and PPG would give the trust the right to collect on their insurance policies under the plan, which Mt. McKinley claimed would unfairly alter the policies.

After two years of budget cuts and further hits from the federal budget sequestration, officials at one of the nation's busiest bankruptcy courts say they are barely getting by on a bare-bones budget, Dow Jones Newswires reported yesterday. The funding for the U.S. Bankruptcy Court for the Southern District of New York has been reduced by 37 percent over the last two years, to $5.06 million for 2013 from $8.06 million in 2011. The 2013 budget includes the 4 percent cut the court saw as a result of the across-the-board budget reductions that took effect in March, known as sequestration. And the court, which has handled some of the biggest, most high-profile chapter 11 cases in recent years, is expecting more budget cuts next year, which could mean further staff cuts.

U.S. District Judge Andrew Carter ruled yesterday that Borders owes nothing to holders of roughly $210.5 million of gift cards that had not been used by the time the bookstore chain shut down, Reuters reported yesterday. Judge Carter said that it would be unfair to other creditors of the former Borders Group Inc. to let gift card holders pursue recoveries from the bankruptcy estate. To do so, Carter explained, could upset a liquidation by Borders' bankruptcy trustee that is already "substantially" completed. He also said that card holders failed to prove they met all the requirements for an exception, including that unsecured creditors whose interests might be harmed had been notified about the litigation and given a chance to object.

TPO Hess Holdings Inc., a printer of commercial and educational materials, filed for bankruptcy protection from creditors, citing a slump in the industry and the global economic downturn, Bloomberg News reported today. The Kent, Ohio-based company, formerly known as Hess Print Solutions, today listed assets of as much as $50,000 and debt of as much as $100 million in a court filing in Delaware. After a turnaround effort, the company “continued to be adversely affected by overall macroeconomic challenges, industry wide overcapacity and increased pricing pressure” from competitors, according to court papers. The company plans a sale to Bang Printing of Ohio, subject to an auction, for about $19.2 million, court papers show.

Video game maker Atari Inc. is seeking court approval for the sale of all its assets as it works its way out of bankruptcy protection, Reuters reported yesterday. The company said on Tuesday that it tried looking for a buyer with the help of its investment banker Perella Weinberg Partners, but was unable to find a stalking-horse bid acceptable to it. Atari has set a minimum bid of $15 million for the Atari brand. The company received a $5 million debtor-in-possession financing from Alden Global Value Recovery Master Fund LP.

Japan's Elpida Memory Inc. asked a bankruptcy court yesterday to enforce its reorganization plan sale to Micron Technologies Inc., a final step to creating the world's second-largest maker of memory chips, Reuters reported yesterday. Boise, Idaho-based Micron has been losing money as the market for personal computers steadily loses ground to smartphones and tablets. Acquiring Elpida will allow Micron to create greater economies of scale and will rank the company behind Samsung Electronics in the memory chip market. The majority of Elpida's secured and unsecured creditors approved the plan, which included the sale of assets to Micron for 60 billion yen ($582 million) in cash and another 140 billion yen ($1.36 billion) paid in annual installments until 2019.

Diamond McCarthy's litigation shop has been hired by Dewey & LeBoeuf's liquidation trustee, Alan Jacobs, to pursue claims against former partners from the now-defunct firm, according to court filings made this week, Am Law Daily reported today. The role is a familiar one for Diamond McCarthy, which is currently filling trustee roles in the chapter 11 bankruptcies of Washington, D.C., litigation firm Howrey and convicted Ponzi schemer Marc Dreier's defunct Dreier LLP. Jacobs was appointed trustee in the Dewey bankruptcy following the approval of the firm's chapter 11 liquidation plan in February. In addition to Diamond McCarthy, Jacobs is being advised by Brown Rudnick, which served as counsel to unsecured creditors in the first phase of Dewey's bankruptcy, and New York bankruptcy boutique Togut, Segal & Segal, whose lawyers led work for the debtor as it sought approval of the liquidation plan. In its newest role, which does not require court approval, Diamond McCarthy is responsible for investigating whether to pursue so-called unfinished business claims against former Dewey partners related to work they took with them to their new firms, as well as clawback claims against 115 former partners who did not agree to sign on to a $71 million settlement that became the linchpin of the Dewey liquidation plan.

B456 Systems Inc., the lithium-ion battery maker which received a $249 million U.S. government grant, won court approval on Monday for its bankruptcy plan, Reuters reported yesterday. Bankruptcy Judge Kevin Carey approved the plan under which unsecured creditors of the company, formerly A123 Systems Inc., are expected to recover about 65 cents for each dollar. B456 had earlier won court approval to sell its automotive battery business and related assets to a U.S. unit of China's largest auto parts maker, Wanxiang Group. Wanxiang beat out the only other active bidder, Johnson Controls Inc., in a court-supervised auction for the assets of Waltham, Mass.-based B456. B456 had received a $249 million grant from the U.S. government as part of a clean energy program to build manufacturing facilities in Michigan. About half the money was never released. The company filed for bankruptcy in October due to weaker-than-expected demand for hybrid vehicles and technical problems.