American Home Mortgage Investment Corp. secured lenders have reached a deal with unsecured creditors over how to divide up cash raised in the failed company’s bankruptcy liquidation, the Associated Press reported yesterday. Banks led by Bank of America Corp. have agreed to take the first $1.02 billion raised in American Home’s chapter 11 case, and split anything above that with creditors. The settlement, which must be approved by the bankruptcy court, heads off the threat of protracted litigation between American Home’s banks and the committee that represents unsecured creditors, a group that also includes leading Wall Street banks. The pact also aligns unsecured creditors with Bank of America in calling for the fast sale of a portfolio of 3,400 mortgages that represent the last major piece of collateral on about $1.08 billion worth of bank loans.

InSight is due to go before a bankruptcy judge Monday in Wilmington, Del., to seek approval of its prepackaged chapter 11 plan, but U.S. Trustee Kelly Beaudin Stapleton said that last-minute changes made to the plan hurt the interests of InSight’s shareholders and subordinated debtholders, the Associated Press reported on Friday. Shareholders would get only 10 percent of the reorganized company, instead of the 13 percent they were originally promised. Subordinated debtholders would see their stake diluted by the addition of $15 million in new debt, although that loss would be offset by an increased equity stake in the company. However, a group of subordinated debtholders - mainly hedge funds - said in court papers Thursday that they don’t mind the changes and asked a judge to confirm the chapter 11 plan.

Amtrol Inc. announced that it has emerged from its chapter 11 reorganization thanks to the closing of $128 million in exit financing, the Providence (R.I.) Journal reported yesterday.  The closing follows the May 24 confirmation by Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware, of the plan proposed by the company and its unsecured creditors. The plan received approval from 100 percent of creditors who held Amtrol senior subordinated notes. More than 98 percent of those creditors, led by Newport Global Advisors, have converted their notes to equity in the company.  The exit financing – arranged by Merrill Lynch and Credit Suisse – was used to repay the debtor-in-possession financing that had allowed Amtrol to operate normally since it filed for chapter 11 protection in December, to pay off the less than 2 percent of noteholders who elected to receive cash instead of equity, and cover the costs of the bankruptcy filing.