By Rick Rothacker and Caroline Humer

(Reuters) – Ally Financial is “absolutely not” looking to sell its core U.S. auto lending business as it seeks ways to pay back $12 billion it owes to U.S. taxpayers after a government-funded bailout during the financial crisis, the company’s CEO said Tuesday.

Ally, the former in-house financing arm for General Motors Co (GM.N: Quote, Profile, Research, Stock Buzz) once known as GMAC, on Monday announced plans to sell some international operations at the same time that its Residential Capital mortgage unit filed for bankruptcy protection.

ResCap, as the mortgage unit is called, received court approvals at a Tuesday hearing in New York that will allow it to stay in business while in bankruptcy. Under its bankruptcy plan, ResCap will be able to preserve its mortgage servicing operations and other assets pending their planned sales.

At the same time, the bankruptcy judge overseeing the hearing raised questions about the mortgage lender’s plans to halt all home equity loans to its retail customers while in Chapter 11. ResCap attorney Lorenzo Marinuzzi said in court that the company cannot afford the possible total payout of $400 million if the outstanding home equity lines were drawn down.

“My concern is that you are dealing with retail borrowers all over the country in a way that will cause consternation and confusion, and I think that they should know more than that they are out of luck,” said U.S. Bankruptcy Judge James Peck.

Peck said that ResCap, once a major subprime lender and profit generator for Ally, must submit to the court a copy of the letter it plans to send to customers about their credit lines. He also said the company must provide customers with details about their rights in bankruptcy.

NEW YORK, April 24 (Reuters) – Law firm Dewey & LeBoeuf is facing a deadline in less than a week to renegotiate terms of its $100 million credit line with lenders as it scrambles to stay afloat, a source familiar with the situation said on Tuesday.

The firm, which has lost about 70 partners out of 300 since the start of year, owes roughly $75 million to the bank group, according to one source, who was not authorized to discuss the situation publicly.

The negotiations are ongoing ahead of an April 30 deadline, this person said. When the debt comes due, the lenders can ask to be repaid, which could put the firm into default if it cannot do so.

The bank group is led by JPMorgan Chase and includes Citi Private Bank, Bank of America Corp and HSBC Holdings PLC, two sources said. JPMorgan, Bank of America and Citi declined to comment. HSBC was not immediately available.

Representatives for Dewey were not immediately available to comment.

The details on the loan negotiations were initially reported by The Wall Street Journal.

Sources told Reuters last week that Dewey, struggling with high debt and departures of lawyers, has hired bankruptcy attorney Albert Togut of law firm Togut Segal & Segal and is working on its restructuring options.

NEW YORK, April 4 (Reuters) – Power producer Dynegy Inc said it has resolved major disputes with creditors that could put one of its units a step closer to emerging from bankruptcy.

Dynegy said in a statement that it reached an agreement in principle with creditors holding more than $2.5 billion of claims against Dynegy Holdings LLC, which filed for bankruptcy protection on Nov. 7.

The creditors had complained that Dynegy shielded assets from them before putting the unit into bankruptcy. A bankruptcy examiner last month issued a scathing report that bolstered their position, criticizing steps the company took ahead of filing.

Some noteholders have not signed onto the agreement and other issues remain for Dynegy, including a U.S. Trustee motion to appoint a Chapter 11 trustee to manage the bankruptcy. Still, the company’s CEO predicted the unit will emerge from bankruptcy protection this year.

“The parties have taken a pragmatic approach and have the company back on track to put the Dynegy Holdings Chapter 11 case behind it during the third quarter,” Robert Flexon, chief executive of Dynegy and Dynegy Holdings, said in a statement.

The settlement resolves claims that resulted from a dispute over whether Dynegy acted properly last Sept. 1 in taking coal-powered plant assets, valued at $1.25 billion, from Dynegy Holdings.

The court-appointed examiner, Susheel Kirpalani, said in his March 9 report that the move was a “fraudulent transfer” that harmed Dynegy Holdings, and that many directors who approved the swap did not understand it or had conflicts of interest.

March 15 (Reuters) – Bidders are lining up in earnest now that Eastman Kodak’s patent sale is set to resume.

After being placed on hold so that the 130-year-old photography pioneer could file for Chapter 11 bankruptcy protection earlier this year, the auction for more than 1,000 of Kodak’s digital imaging patents is ramping up again, according to three sources close to the matter.

Investment banks Lazard Ltd and Jefferies & Company Inc, an adviser to the unsecured creditors committee, are working together on the patent sale, which they hope will bring in as much as $2 billion, the sources said.

The banking tandem had previously worked in similar roles advising bankrupt telecom-equipment maker Nortel Networks Corp on the sale of about 6,000 patents to an Apple Inc-led consortium for $4.5 billion.

“We anticipate a robust and lively auction process which will assist us in achieving our objective of monetizing our non-core IP assets,” a Kodak representative said.

Kodak, the iconic company that invented the hand-held camera, filed for Chapter 11 bankruptcy protection on Jan. 19.

The company, which holds 10,000 patents, will focus a significant part of its restructuring on finding a buyer for the 1,155 U.S. patents within its Digital Capture and Kodak imaging Systems & Services portfolios. The portfolios also include more than 500 foreign patents.

By Caroline Humer

(Reuters) – Dynegy Holdings will renegotiate a bankruptcy plan under the guidance of a court-appointed examiner after that examiner said on Friday that Dynegy had participated in an asset transfer prior to its November Chapter 11 filing that defrauded creditors.

The examiner, Susheel Kirpalani, was ordered during a hearing on Monday to work with Dynegy and its constituents, including creditors, to reach an agreement on a restructuring plan for the company, said Dynegy, a power producer.

“We look forward to working with Mr. Kirpalani and Dynegy Holdings’ creditors to maintain an open and productive dialogue to make progress in the Chapter 11 proceeding,” said Katy Sullivan, a Dynegy spokeswoman.

Judge Cecilia Morris during the hearing — in Poughkeepsie, New York, bankruptcy court — ordered Kirpalani to work with the groups and set a hearing date of April 4 for the involved parties to report back to her, Sullivan confirmed.

Separately, the U.S. government has asked that an outside trustee take over Dynegy Holdings’ bankruptcy proceedings.

Shares of Dynegy Inc, the parent company of bankrupt Dynegy Holdings, were down 26 percent at 56 cents in mid-afternoon trade on the New York Stock Exchange.

By Nick Brown and Caroline Humer

(Reuters) – Culligan International Co, which sells water coolers and filters and installs water softening devices in homes, has hired restructuring advisers and is considering options including a possible bankruptcy, according to sources familiar with the matter.

Culligan, known for its advertisements starting in the 1950s that featured a cartoon housewife beckoning “Hey Culligan man!”, is owned by private equity firm Clayton Dubilier & Rice.

The company, based in Rosemont, Illinois, has hired law firm Debevoise & Plimpton and financial adviser Evercore Partners, according to the people familiar with the situation, who declined to be named because they were not authorized to speak publicly.

One option is a possible Chapter 11 bankruptcy filing, as the company struggles under roughly $900 million in loan debt that it has not refinanced, the sources said. The debt matures starting in May.

Clayton Dubilier is also considering a sale of the company, a move that could take place in or out of bankruptcy, one of the people said.

Culligan representatives did not respond to requests for comment. Clayton Dubilier and Evercore declined to comment, while a spokeswoman from Debevoise had no immediate comment.

March 7 (Reuters) – Culligan International Co, which sells water coolers and filters and installs water softening devices in homes, has hired restructuring advisers and is considering options including a possible bankruptcy, according to sources familiar with the matter.

Culligan, known for its advertisements starting in the 1950s that featured a cartoon housewife beckoning “Hey Culligan man!”, is owned by private equity firm Clayton Dubilier & Rice.

The company, based in Rosemont, Illinois, has hired law firm Debevoise & Plimpton and financial adviser Evercore Partners, according to the people familiar with the situation, who declined to be named because they were not authorized to speak publicly.

One option is a possible Chapter 11 bankruptcy filing, as the company struggles under roughly $900 million in loan debt that it has not refinanced, the sources said. The debt matures starting in May.

Clayton Dubilier is also considering a sale of the company, a move that could take place in or out of bankruptcy, one of the people said.

Culligan representatives did not respond to requests for comment. Clayton Dubilier and Evercore declined to comment, while a spokeswoman from Debevoise had no immediate comment.

Culligan’s key debt holders include private equity firms Centerbridge Partners and Angelo Gordon & Co, according to sources. Both firms did not return calls requesting comment.

NEW YORK, March 6 (Reuters) – Bankruptcy can be just about as traumatic as it gets for a company, its employees, customers, and suppliers. The only thing worse – going through it again, and again.

The number of companies making second trips through bankruptcy — sometimes dubbed “Chapter 22″ filings, or Chapter 11 times two — has jumped in the first two months of 2012.

Four of the 17 public companies that have filed for bankruptcy this year, including Twinkie maker Hostess Brands and family-style restaurateur Buffets, are repeat filers, according to BankruptcyData.com, which tracks filings by publicly traded companies and repeat filings for companies that were once listed on a stock exchange. That compares with six companies that slid back into bankruptcy in all of 2011.

It’s not unheard of for a company to file a “Chapter 33.” Late last year, clothing retailer Filene’s Basement filed its third Chapter 11 in 12 years. It has now gone out of business.

Companies often go through bankruptcy as the system seems to encourage – getting out of Chapter 11 with streamlined operations and in better shape to weather economic changes.

When that does not happen, it is often because a company still has too much debt. Lenders are a big factor because they provide the financing, but the blame can also lie with the companies, investors, bankers, lawyers and judges.

“There is too much emphasis on getting out, and getting on with business rather than whether it is going to work,” said Ed Altman, the Max L. Heine Professor of Finance at the Stern School of Business at New York University.

By Caroline Humer

(Reuters) – Lehman Brothers Holdings Inc’s record $639 billion bankruptcy ended on Tuesday, clearing the way for it to start distributing about $65 billion to creditors starting on April 17, court documents show.

Lehman has said that it expects that first group of payments to creditors to be at least $10 billion.

Lehman, now a small fraction of its former size, collapsed on September 15, 2008 with $639 billion in assets, rocking the foundations of the global financial markets and catalyzing the Great Recession.

Exactly 1,268 days later, the legal end to the case enables Lehman to start paying back the creditors, which include Wall Street firms like Goldman Sachs Group Inc and hedge fund investors such as Paulson & Co, which together had asserted more than $300 billion in claims.

But Lehman Brothers will live on for some time as a sliver of its former self, selling assets and continuing to operate in its midtown Manhattan headquarters, where it is down to two floors. At the peak of its bankrupt operations, about 735 people were working at Lehman, compared with about 433 in January.

The company, whose assets include $35 billion in cash, is due to make a second payment in September and then will continue to make periodic distributions in the future as it sells off its remaining holdings.

Jan 31 (Reuters) – An Eastman Kodak employee filed a civil lawsuit against Kodak’s board members and other fiduciaries of the photography companies’ retirement plans, saying they breached their duties as the company was spiraling toward bankruptcy.

Mark Gedek, who continues to work at Kodak, said in the lawsuit that he is a participant in the Kodak Employees Savings and Investment Plan as well as the Kodak Employee Stock Ownership Plan. The board members and directors of those plans continued to sell shares to employees and invest in them ahead of the bankruptcy, he said.

“Kodak believes the suit is without merit, and we will vigorously defend against it,” Kodak spokesman Christopher Veronda said in an emailed statement.

Kodak filed for bankruptcy in mid-January, saying it would use the bankruptcy court process to try to sell patents and shed other assets to bring costs and revenue in line. Typically in bankruptcy, shareholders’ equity is worth nothing.

Kodak shares, which trade for 34 cents on the pink sheets, were trading at 55 cents on Jan. 18 before the company filed for bankruptcy.

Gedek said in the lawsuit, which seeks class-action status, that the directors and officials did not disclose to stock-plan participants complete information about Kodak’s dire financial condition and kept its investments in the company’s equity when it was no longer prudent.

In the suit, Gedek said the company should have known it was suffering from a dying technology; was unable to bring new, profitable products to the market quickly enough; could not generate enough cash from patent lawsuits and was suffering from a liquidity crisis.