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AMR Corp., the airline merging with US Airways Group Inc., won a judge’s approval to borrow as much as $3.25 billion as it moves toward exiting bankruptcy, Bloomberg News reported. AMR, the parent of American Airlines, sought the financing to take advantage of low interest rates, fund costs tied to its reorganization and repay debt. The loans, approved yesterday at a court hearing by Bankruptcy Judge Sean Lane will be American’s “primary source” of financing for emerging from bankruptcy, said Richard Hahn, an attorney for the Fort Worth, Texas-based company. American filed for bankruptcy in 2011 and is planning to merge with US Airways to create the world’s largest airline. American is set to complete its bankruptcy reorganization through the merger with Tempe, Arizona-based US Airways later this year.

U.S. Trustee Roberta A. DeAngelis is objecting to casino owner Revel AC Inc.'s restructuring plan, taking aim at "expansive" provisions meant to shield everyone from lenders to equity holders from liability, Dow Jones Daily Bankruptcy Review reported today. DeAngelis on Tuesday urged a judge to stop a proposed debt-for-equity swap in its tracks unless certain tweaks are made to the company's chapter 11 exit plan. In particular, the trustee took aim at exculpation and release provisions that Revel wants to hand a host of parties.

The maker of the zero-calorie nutritional drink Skinny Water is seeking to fatten up its coffers, filing for bankruptcy amid a lack of funding and facing the loss of its trademarks, Reuters reported today. Skinny Nutritional Corp. filed for Chapter 11 protection last week and announced the filing yesterday amid a clamor from some consumers and investors for information about the status of the company. The company listed about $3 million in assets and $6 million in liabilities, but a budding dispute with its lender, Trim Capital, could make for a contentious case. In Wednesday's statement, Skinny said that it entered a $15 million financing deal with Trim last year but received only $1.27 million of the money. Skinny alleged that Trim "failed to complete" its obligations, then began foreclosure proceedings that would have forced Skinny to turn over its intellectual property assets to Trim in the absence of a bankruptcy filing.

Oreck Corp., the Nashville, Tenn.-based manufacturer of upright vacuums and other cleaning products, has filed for chapter 11 protection and is looking for a buyer, the Tennessean reported today. Oreck said that despite the filing, the company will continue daily operations without interruption. Oreck laid off an undisclosed number of employees at the end of January, as well as in October 2012. At the time, CEO Doug Cahill said that the layoffs were not a cost-cutting maneuver, and were instead a result of a shift away from the company's traditional emphasis on direct sales. Oreck has about 70 employees in the corporate office in Nashville, and it employs 250 workers at its plant in Cookeville. In addition, the company has about 325 employees at its 96 company-owned retail stores. The company said that it anticipates that after the sale, plant operations and corporate headquarters will stay in Tennessee.

Residential Capital LLC is suing a group of junior bondholders to block them from wresting control of the subprime mortgage lender's bankruptcy case, Dow Jones Newswires reported yesterday. In a lawsuit filed on Friday evening in bankruptcy court, ResCap sued the bondholder group—dubbed the ad hoc group of junior secured noteholders—asking a judge to reject their claims on some of lender's assets securing the bonds. Lawyers for ResCap, a subsidiary of government-owned lender Ally Financial Inc., say that the bondholders are attempting to take over the chapter 11 case by manufacturing an "oversecured" position that would entitle them to hundreds of millions of dollars in interest payments. At issue is the bondholders' claim that they're owed $2.2 billion in principal and interest, which includes so-called post-petition interest accruing at about $250 million a year. ResCap's lawyers, however, said that the value of the collateral securing the bonds is only $1.5 billion. If so, that means the bondholders are under-secured and thus not entitled to interest payments.
http://www.foxbusiness.com/news/2013/05/06/rescap-sues-bondholders-over…

In related news, Residential Capital LLC Chief Executive Thomas Marano has resigned as the mortgage subsidiary of auto lender Ally Financial Inc. works its way out of bankruptcy, Reuters reported yesterday. Marano, who joined ResCap in 2008, will remain as a member of the board. Marano spent more than 25 years at now-defunct investment bank Bear Stearns & Co., where he was the global head of mortgage and asset-backed securities. Marano was managing director at Cerberus Capital Management before moving to ResCap. ResCap filed for bankruptcy in May 2012 to protect its parent from mortgage liabilities that threatened to swamp the company. Ally is 74 percent-owned by the U.S. government after a series of bailouts.
http://www.reuters.com/article/2013/05/06/rescap-ceo-resignation-idUSL3…

Ahern Rentals Inc. is seeking court approval for $495 million in financing to support a bankruptcy-exit plan that the construction equipment company is hoping will trump a competing plan put forth by its bondholders, Dow Jones Daily Bankruptcy Review reported today. Ahern said in a court filing it has lined up a $350 million senior secured credit facility and $145 million term loan exit facility to help pay off debt that would come due in the event its chapter 11 restructuring plan is chosen by creditors.

Bankruptcy Judge Shelley Chapman was critical of the U.S. Trustee Program's handling of GSC Group Inc.'s settlement talks with law firm Kaye Scholer and financial adviser Capstone, which the U.S. Trustee had accused of covering up conflicts of interest to enhance fees, Reuters reported yesterday. The judge is presiding in a trial over the alleged conflicts of interest by advisers to GSC Group Inc., an investment manager that eventually sold its assets to its lender, Black Diamond Capital. The dispute stems from the role of Robert Manzo, the adviser tasked with liquidating GSC's assets after the sale. Capstone listed him as an employee, but the U.S. Trustee said that he was a contractor subject to fee-sharing agreements, which are largely barred under bankruptcy laws. The parties also covered up long-standing professional and personal ties between Manzo and partners at Kaye Scholer, the Trustee alleged. U.S. Trustee Tracy Hope Davis said in court that her office plans to respond more fully to Judge Chapman's concerns.

As of next year, former Dewey & LeBoeuf chairman Steven Davis—faulted by many both inside and outside the firm as the chief culprit in its collapse—is to begin chipping away at the $511,145 he has agreed to give the Dewey estate to help satisfy creditors under a broader settlement that protects him against potential mismanagement claims, American Lawyer Daily reported today. Unlike more than 500 other former partners who were required to make payments to the defunct firm’s estate by early April in exchange for a release from Dewey-related liability, Davis has considerably more time to meet his obligations. Starting on March 22, 2014, court filings show, he must pay the estate a sum equal to 8 percent of his annual earnings each year for the next six years. Any outstanding balance will accrue interest at a rate of 9 percent annually. Once that March 2019 payment is made, though, whatever debt Davis still owes will be wiped away, according to a promissory note filed in bankruptcy court on April 22 as part of the proposed settlement between Davis, the Dewey estate, and XL Specialty Insurance. For its part, XL, which issued Dewey’s $25 million management liability policy, has pledged to pay the estate the $19 million not yet spent covering legal defense costs. XL has 10 days from when the settlement, which requires court approval, becomes final to make its payment to the estate.

Bankruptcy Judge Robert Drain said yesterday that he is prepared to let creditors vote on Reader’s Digest Association Inc.’s chapter 11 exit plan, which would give control of the company to a group of bondholders, Dow Jones Daily Bankruptcy Review reported today. Judge Drain approved the Reader’s Digest’s disclosure statement after it negotiated with creditors to give them better recoveries.

Patriot Coal Corp. yesterday told a judge it would liquidate if not allowed to make drastic cuts to employee pension and health care benefits, as coal miners protested on the first day of a week-long court hearing, Reuters reported yesterday. Patriot, which filed for bankruptcy in July, told a bankruptcy court that it planned to cut $150 million in annual labor costs by ceasing pension contributions and converting healthcare to an outside fund. The United Mine Workers of America (UMWA) has condemned the proposals as "nowhere near" fair, but a Patriot lawyer said that it is a necessary step for the company to survive.