Model-train manufacturer Lionel LLC has entered into a contingent agreement with competitor Mike’s Train House that could resolve their seven-year trade secrets dispute and put Lionel on course to emerge from chapter 11 by the first quarter of 2008, Bankruptcy Law360 reported yesterday. Three years after Chesterfield, Mich.-based Lionel was driven into bankruptcy by a major defeat in a trade secrets suit against MTH for $38.6 million, Lionel filed its amended reorganization plan on Tuesday in the U.S. Bankruptcy Court for the Southern District of Manhattan. The plan outlined a deal that would settle all of MTH claims against Lionel.

Bankruptcy Judge Kevin J. Carey signed off on the liquidation plan of bankrupt ladder company Werner Holding, Inc., allowing the company to finish winding down its operations. Bankruptcy Law360 reported on Friday. The judge set up a liquidation trust, saying that it was an essential element of the plan, and named Charles Stanziale as the liquidation trustee. The plan stipulates that holders of administrative and priority tax claims will be paid by the companies that bought Werner’s assets, and classifies the remaining claims and equity interests in the bankruptcy proceedings. Allowed administrative claims from the wind-down in operations will be paid from an account set aside for such matters and any remaining claims from one of Werner’s buyers, Milk Street Investors LLC. A group of investors including Black Diamond Capital Management LLC, Brencourt Advisors LLC, Levine Leichtman Capital Partners III LP, Milk Street Investors LLC, Schultze Asset Management LLC and TCW Shared Opportunity Funds, bought the assets of Werner in June for $265 million.

Bankruptcy Judge Robert Drain approved a settlement yesterday under which French auto parts maker Valeo SA will pay Delphi Corp. $4 million to resolve a lawsuit alleging that it sold defective parts, the Associated Press reported yesterday. The company’s subsidiary, Delphi Automotive Systems LLC, sued Valeo in Michigan state court in 2005, alleging that some multifunctional electrical switches Valeo sold Delphi were defective. Delphi, the largest auto-parts supplier to General Motors Corp., is trying to emerge from bankruptcy by early 2008. As part of its reorganization, the Troy, Mich.-based company has been settling litigation and restructuring supply contracts with its big customers, such as GM. The company is expected to file an amended reorganization plan on Monday.

Bankruptcy Judge Martin Glenn appointed a trustee to sort out the finances of the 1031 Tax Group after a $300 million loan failed to come through for the bankrupt company, the San Jose Mercury News reported yesterday. The Richmond, Va.-based company filed for chapter 11 in May after authorities said that founder Edward Okun allegedly stole about $151 million from 300 clients’ property sales nationwide. That company was one of five qualified intermediaries that Okun bought during the past two years and placed under the umbrella firm 1031 Tax Group. Qualified intermediaries hold proceeds from property sales for a fee under §1031 of the U.S. tax code. Jim Lukenda, a restructuring officer from Huron Consulting Group hired to reorganize 1031 Tax Group, said he’d been counting on the loan to repay investors in August and finance 1031’s operations, but the money from JPS Capital Partners never materialized.

Members of the United Auto Workers at four Chrysler LLC plants in Indiana voted late last night to reject a tentative labor contract with the auto maker, delivering a significant blow to the union leadership’s bid to win approval for the deal from the rank and file, the Wall Street Journal reported today. A majority of the 45,000 UAW members who work at Chrysler facilities must ratify the contract. If it is rejected, the union could try a second vote or may have to re-open negotiations with Chrysler. The last time a national contract was rejected was in 1982, also by workers at Chrysler.

Auto parts maker Dana Corp. asked a court to allow the company to obtain a backstop commitment for the purchase of an additional $40 million in Series B preferred stock, Bankruptcy Law360 reported on Friday. Dana requested approval of a plan that would allow the company to ask primary investor Centerbridge Capital Partners LP for a backstop commitment for the purchase of $40 million in stock. The company also asked the court for permission to obtain a backstop commitment for the purchase of $250 million in Series B stock that is not backstopped by Centerbridge. In exchange for the backstop agreement, Dana will pay Centerbridge an $11.6 million commitment fee and release the firm from a previous commitment to purchase a certain percentage of the Series B shares.

Two members of the founding family behind Werner Holding Co. Inc. are urging the bankruptcy judge to deny the second amended liquidation plan put forth by the unsecured creditors’ committee over the committee’s intention to consolidate the bankrupt ladder maker’s various estates, Bankruptcy Law360 reported yesterday. The Werners voiced further concern over the plan’s alleged failure to pay for all administrative claims, echoing a similar protest lodged by the U.S. Trustee earlier in the case. The Werners also argued in the filing that the plan incorrectly seeks to predetermine the legal effect of certain actions and unfairly tries to put certain obligations on the Werners and other employees who may be targeted in future litigation.
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Kitty Hawk Inc. filed for chapter 11 protection on Monday, marking the second time the Dallas-based freight transportation company has reorganized since 2000, the Dallas Business Journal reported yesterday. The company, which owns Kitty Hawk Cargo Inc., Kitty Hawk Aircargo Inc., Kitty Hawk Ground Inc. and KH Ground Inc., said in its bankruptcy petition that it has $40 million in book value assets and total estimated liabilities of $31 million. The company reported a loss for its first fiscal quarter of 2007 of $11.6 million or 22 cents a share, which the company said came as a result of an industry-wide slowdown as “a variety of industries face weak demand for their own products.”

Still hoping to exit from chapter 11 by year’s end, Solutia Inc. filed its fifth amended reorganization plan yesterday, Bankruptcy Law360 reported yesterday. The most recent plan includes $250 million of new investment in the reorganized company through a backstopped rights offering to certain creditors. It will also reallocate the legacy liabilities that Solutia assumed when it was spun off. Additionally, it will resolve all the litigation between the settling parties, including a potential appeal by the noteholders, the adversary proceeding filed by the current equity holders against former parent companies Monsanto Co. and Pharmacia Corp., and related objections to the Monsanto and Pharmacia claims, Solutia said. The court has tentatively scheduled an Oct. 19 hearing to consider the disclosure statement, according to the company.

Bankrupt mortgage lender American Home Mortgage Investment Corp. has asked a judge to reject a major investor’s request for documents, saying that it would divert resources from more important things like the sale of its loan servicing business, Bankruptcy Law360 reported yesterday. In court documents filed Friday with the U.S. Bankruptcy Court for the District of Delaware, American Home noted that it had already received 80 objections to its sale motion and that it was facing a trio of adversary suits that had been “multi-tracked” for trial. As a result, American Home said it did not have time to compile the vast amount of information requested by Vantage Pointe Capital LLC, which is hoping to shed light on how the company managed to lose so much capital so fast in the days leading up to its bankruptcy filing. It added that numerous documents demonstrating the company’s decline in equity value were already publicly available and that the magnitude of the document request was unduly burdensome.

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