A group of Movie Gallery Inc.’s landlords, including Wal-Mart Inc., objected to the bankrupt movie rental company’s proposal to begin auctioning off many of its leases and close its stores, Bankruptcy Law360 reported yesterday. Wal-Mart, one of Movie Gallery’s largest landlords, said that it should have been consulted before the bankruptcy court gave Movie Gallery permission to sell its leases. Most of the other landlords who objected are smaller, local companies who leased commercial space to Movie Gallery and voiced similar concerns. The court granted Movie Gallery leave to sell its leases in an interim order handed down shortly after the company declared bankruptcy.

Dana Corp. has agreed to pay 7,500 personal injury claimants a total of $2 million to resolve their lawsuits stemming from asbestos-laden gaskets produced by the auto-parts supplier, the Associated Press reported yesterday. Dana has said that asbestos-related personal-injury claims, which totaled 150,000 as of June 30, will pass through its bankruptcy unchanged. The company, however, said that many of the claimants haven’t become sick. According to court papers, about 7 percent of the asbestos claims filed against Dana allege mesothelioma or cancer. A court hearing on the proposed settlement is scheduled for Nov. 15.

Solutia Inc. is asking the court overseeing its chapter 11 proceedings to reclassify claims totaling more than $15 billion as “tort claims” and expunge claims predicated on retiree benefits, Bankruptcy Law360 reported on Friday. The claims Solutia wants reclassified as tort claims include personal injury and product liability claims related to exposure of contamination from chemicals. Solutia’s reorganization plan calls for tort claims to pass through the chapter 11 process without being affected and then be resolved in the normal course of business by either Solutia or Monsanto, the company said. Solutia’s conditional objection to the retiree claims seeks to implement a retiree settlement as well as the most recent incarnation of Solutia’s plan, which both require the claims be expunged, the company asserted.

Judge Stuart M. Bernstein said that the Quigley Co.’s disclosure statement to repay creditors and asbestos claimants can move forward, dealing a blow to a group of asbestos personal-injury claimants, the Associated Press reported yesterday. Judge Bernstein said that while the plan raises questions about the treatment of asbestos creditors, its disclosure statement provides creditors with enough information to make an informed decision on the plan. The disclosure statement “does not describe a plan that is unconfirmable as a matter of law,” Judge Bernstein said, denying the asbestos group’s argument that the plan has no hope of confirmation and shouldn’t be sent to creditors for a vote. Quigley, a defunct company that once made heat-resistant products containing asbestos, is trying to wrap up its chapter 11 case with a plan that would compensate victims sickened by its products through a trust funded by $650 million in contributions from drug maker Pfizer Inc.

Bankruptcy Judge Richard Schmidt criticized Pacific Lumber Co.’s reorganization plan, saying that it would likely incite opposition from creditors, Bankruptcy Law360 reported yesterday. Judge Schmidt said that although Pacific Lumber plans to finance its reemergence by using its land for luxury housing developments, the company has not managed to attract the support of Humboldt County, where the land is located. Pacific Lumber’s creditors echoed Judge Schmidt’s skepticism about the plan, with Bank of New York arguing that the company’s $1 billion development plan would negatively impact the quality of life in Humboldt County.

The House Energy and Commerce Commerce, Trade and Consumer Protection Subcommittee approved legislation that would give the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency broad power to stop banks from engaging in unfair and deceptive practices, CongressDaily reported today. The FDIC, which guarantees checking and savings accounts in commercial banks, and the OCC, which oversees national banks, have authority to crack down on mortgage and credit fraud only at banks under their jurisdiction. The bill, sponsored by House Financial Services Chairman Barney Frank (D-Mass.),  would direct the two agencies to develop comprehensive rules against unfair and deceptive banking jointly with other regulators, or individually. Currently, the only agency with power to issue across-the-board bans on fraud and deception is the Federal Reserve, which Frank and others say has not done enough to protect consumers.

Poor quarterly results from banks across the United States over the past two weeks suggest that credit problems once confined to high-risk mortgage borrowers are spreading across the consumer landscape, posing new risks to the economy and weighing heavily on the markets, the Financial Times reported yesterday. Banks have raised reserves for loan losses by at least $6 billion over the second quarter and by even larger amounts from last year, indicating that  financial executives believe consumers will be increasingly unable to make payments on a variety of loans. Banks are adding to reserves not just for defaults on mortgages, but also on home equity loans, car loans and credit cards.

Bankruptcy Judge Christopher Sontchi denied requests from GMAC Mortgage LLC and other parties to postpone the sale of American Home Mortgage Holdings Inc.’s servicing platform, Bankruptcy Law360 reported yesterday. Judge Sontchi on Monday approved an agreement between American Home and the servicing platform buyer, AH Mortgage Acquisition, and Fannie Mae. The agreement settled a dispute between the debtors and Fannie Mae over the servicing of its loans after the sale of the portfolio was completed. The same day, American Home filed a motion with the bankruptcy court asking approval for the sale of its Ginnie Mae portfolio of loans to MidFirst Bank. American Home also asked the court to shorten the time to hear the motion and requested an Oct. 23 hearing.
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Wall Street reaction to Monday’s proposal by three large banks that would start a fund to serve as buyer of last resort for structured investment vehicles (SIVs) has been less then enthusiastic, the New York Times reported today.  Many investors and analysts describe the fund as a stopgap that will relieve some pressure but not address more intractable problems with mortgage securities held by SIVs. “It’s very much a partial fix,” said Ethan S. Harris, chief U.S. economist for Lehman Brothers. But he said that when combined with the efforts of the Federal Reserve, which has cut interest rates and stepped up lending to financial institutions, the fund should be “an important cushioning of the blow to the capital market.” Depending on how popular the fund is, it could end up with a large share of the SIV’s outstanding balance of $320 billion.

Dura Automotive Systems Inc. has asked a judge to approve a $125,000 payment to a departing executive to prevent him from working for a competitor and divulging confidential company information, the Associated Press reported yesterday. In documents filed Friday with the U.S. Bankruptcy Court in Wilmington, Del., Dura outlined a separation agreement it reached with John J. Knappenberger, its departing vice president of information technology and administration. The deal would pay Knappenberger, a 14-year veteran of the company, for unused vacation time, subject him to a multi-pronged “noncompete consideration,” and waive his current and future claims against the company. A hearing on the matter is scheduled for Nov. 1.