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A federal judge on Tuesday approved nearly $400 million in fees and expenses owed to the professionals responsible for guiding American Airlines through its chapter 11 restructuring, the Wall Street Journal reported yesterday. During a hearing at the U.S. Bankruptcy Court in Manhattan, Judge Sean Lane signed off on a recommendation from a fee examiner that proposed paying $16.3 million in expenses and $371.7 million in fees to 47 professional firms, including lawyers, accountants, consultants and other advisers. The examiner, attorney Robert Keach, had been tasked with keeping costs down and worked with the professionals to trim several million dollars from the total bill, according to court filings. Judge Lane praised Keach's work, noting that the case had presented many complicated and challenging legal issues and that the fees and expenses also covered professional work related to the airline's ordinary course of business.

Fresh & Easy Neighborhood Market Inc., the former U.S. grocery chain, won court approval of its plan to exit bankruptcy by paying creditors in full, except for owner Tesco Plc., Bloomberg News reported yesterday. The company, now known as Old FENM Inc. after selling most of its assets to an affiliate of billionaire Ron Burkle’s Yucaipa Cos., obtained approval from Bankruptcy Judge Kevin J. Carey after resolving objections before yesterday’s bankruptcy court hearing. Tesco “voluntarily agreed to subordinate its claims to all other creditors” in exchange for releases from lawsuits and any value left over after all other claims are fully paid, Timothy W. Hoffmann, a lawyer for Fresh & Easy, said at the hearing.

Bankrupt wireless venture LightSquared on Tuesday revealed a new restructuring proposal that would cede 74 percent of its equity to a new investor group that includes JPMorgan Chase & Co., Cerberus Capital Management and Fortress Investment Group, Reuters reported yesterday. Phil Falcone's Harbinger Capital Partners, which now controls LightSquared, would retain about 12.5 percent of the new equity, according to Joshua Sussberg, a lawyer for a committee overseeing LightSquared's restructuring efforts. JPMorgan, Cerberus and Fortress would supply $1.45 billion in new liquidity, with other investors in the group chipping in another $300 million. Existing lenders with around $1 billion in debt would be repaid in cash.

Bankruptcy Judge Sean Lane said yesterday that he will confirm Genco Shipping & Trading’s plan to exit bankruptcy under the control of its senior creditors, rejecting arguments by shareholders that the proposal undervalues the dry bulk shipper’s assets, Reuters reported yesterday. Judge Lane said that he agreed with the company's estimate that its going concern value was less than $1.5 billion. A committee of shareholders had argued the value could be as high as $1.91 billion, calling Genco’s restructuring a ploy to hand over control to creditors and management. Under the plan, existing shareholders would receive just $30 million in warrants.

Court hearings to determine if Energy Future Holdings Corp., Texas's biggest power company, can adopt a refinancing package that is key to its massive bankruptcy have been extended through July 11 from the original schedule to end yesterday, Reuters reported. "I'm worried about that amount of time being sufficient," Judge Christopher Sontchi said at the start of yesterday’s session. "We have a lot of witnesses," said Judge Sontchi, who scheduled time in court on Wednesday and July 10 and July 11. Judge Sontchi is being asked to approve a loan package of about $2 billion to refinance high-yielding debt at Energy Future's EFIH unit, which owns the profitable Oncor power transmission business.

General Motors Co. customers demanding compensation for the eroded value of recalled Cobalts and Ions will hear today how their lawyers plan to fight for the right to sue the carmaker, Bloomberg News reported today. In the Manhattan court where the U.S. financed the automaker’s turnaround five years ago, Bankruptcy Judge Robert Gerber will probably hear that rulings he made freeing GM from responsibility for decreased car values don’t apply to owners of vehicles recalled over faulty ignition switches. The automaker never gave those car buyers a chance to have their say in his court during its 2009 bankruptcy, their lawyers contend. GM knew about the defective switches and broke the rules by not informing customers, the lawyers have said. For its part, GM wants Judge Gerber to affirm his earlier rulings that it’s protected from liabilities after its reorganization.

LightSquared Inc., Philip Falcone’s wireless broadband company, agreed on tentative terms of a reorganization plan that would give majority ownership to JPMorgan Chase & Co. (JPM), Fortress Investment Group LLC and Cerberus Capital Management LP, Bloomberg News reported yesterday. Falcone’s Harbinger Capital Partners LLC would retain a small stake under the plan, which will work only if LightSquared exits bankruptcy by Sept. 30, Joshua Sussberg, a lawyer for a special LightSquared committee, told Bankruptcy Judge Shelley Chapman yesterday. The agreement was reached in mediation following a dispute with creditor Charles Ergen over how his $1 billion in debt would be treated. The plan would be financed with a $1.3 billion first-lien credit facility and the investment of $1.75 billion in new money, Sussberg told Chapman. Cerberus, Fortress and JPMorgan would end up with 74 percent of LightSquared’s new common equity and Harbinger would have 12.5 percent, Sussberg said.

The Supreme Court has granted cert to review the Seventh Circuit's decision in Wellness International Network, Limited v. Sharif, ScotusBlog.com reported yesterday. The issues presented in the case include: (1) Whether the presence of a subsidiary state property law issue in a 11 U.S.C. § 541 action brought against a debtor to determine whether property in the debtor’s possession is property of the bankruptcy estate means that such action does not “stem[] from the bankruptcy itself” and therefore, that a bankruptcy court does not have the constitutional authority to enter a final order deciding that action; and (2) whether Article III permits the exercise of the judicial power of the United States by the bankruptcy courts on the basis of litigant consent, and if so, whether implied consent based on a litigant’s conduct is sufficient to satisfy Article III.

Creditors to Puerto Rico's electricity provider were given a slight respite yesterday when the bonds' trustee made a scheduled payment, but the U.S. municipal bond market remained worried the Puerto Rico Electric Power Authority will soon use a new bankruptcy-like process to restructure its debts, Reuters reported yesterday. The law establishing the process has rattled the $3.7 trillion municipal market since it was passed last week and yesterday it prompted Moody's Investors Service to push ratings on Puerto Rico debt deeper into junk territory. Puerto Rico bonds are widely held due to their tax exemption in every state and their high yields, making them a tempting asset despite the U.S. commonwealth's struggles to cope with a shrinking economy, chronic budget deficits and a $73 billion debt load. PREPA could be the first corporation to test the law, as it faces increasing demands for its limited funds, including payments on expiring lines of credit and fuel purchases. Prices of its junk-rated bonds plummeted to the record low of 36.815 cents on the dollar.

The hourly fees earned on client matters that attorneys take with them when switching firms are not the "property" or the "unfinished business" of their old partnerships, the New York Court of Appeals ruled yesterday in a closely watched case involving the bankruptcies of Thelen and Coudert Brothers, the American Lawyer reported today. The unanimous court said finding that lawyers owe a continuing obligation to their old partnerships for work they do for clients after moving to new firms "does not comport with our profession's traditions and the commercial realities of the practice of law today." "A law firm does not own a client or an engagement, and is only entitled to be paid for services actually rendered," Judge Susan Phillips Read wrote for the 7-0 court. Attorneys in the two cases and others involving hourly billings in the wake of recent law firm bankruptcies said that the ruling brings clarity to what trustees can seek from former firm attorneys who have moved on to other firms. The court made one ruling in the two cases, (Matter of Thelen) Geron v. Seyfarth Shaw, 136, and Matter of Coudert Brothers, 137. The court's analysis of New York's 1919 Partnership Law and the "unfinished business" doctrine was prompted by certified questions from the U.S. Court of Appeals for the Second Circuit stemming from the Thelen and Coudert bankruptcies. Coudert dissolved in 2005 and Thelen in 2008.