Investment bank Bear Stearns Securities Corp. won the latest round in its fight to avoid paying $160 million to the estate of bankrupt firm Manhattan Investment Fund after a district court judge partially overturned a bankruptcy court decision that found Bear Stearns failed to adequately monitor illegal money transfers made before the fund’s collapse, Bankruptcy Law360 reported yesterday. In a ruling handed down on Monday, Judge Naomi Buchwald of the U.S. District Court for the Southern District of New York overturned in part a ruling by Judge Burton Lifland of the U.S. Bankruptcy Court for the Southern District of New York. Judge Lifland’s ruling denied Bear Stearns’ motion to dismiss claims filed by the trustee in the Manhattan Investment Fund bankruptcy and granted the trustee’s motion for summary judgment. Judge Buchwald ruled that Bear Stearns made an effort to investigate the fraud that eventually felled the fund. The judge also said that a trial would be necessary to determine whether Bear Stearns undertook adequate diligence in allowing the transfers.

Calpine will lower its bankruptcy-exit financing package by $400 million to $7.6 billion under a deal with its lenders that gives the power company an extra week to emerge from chapter 11 and loosens some of the loan’s financial covenants, Dow Jones Newswires reported yesterday. Calpine said that it agreed to amend the financing after its lenders, Goldman Sachs Credit Partners, Credit Suisse, Deutsche Bank and Morgan Stanley Senior Funding, Inc., raised concerns that it wouldn’t be able to meet all the conditions to access the financing “including, most significant, as to financial covenants.” The changes, approved by the U.S. Bankruptcy Court in Manhattan yesterday, give Calpine “additional room” to meet certain financial conditions and extend the closing deadline on the financing pact to Feb. 7 from Jan. 31.

A judge on Wednesday allowed bankrupt subprime lender American Home Mortgage Lenders Inc. to ask for an additional $38 million from ABN Amro Holding NV to make advances to mortgagors before eventually turning the mortgages over to ABN, Bankruptcy Law360 reported on Friday. The mortgages are the subject of a repurchase agreement between AHM and the bank, with AHM making the initial sale of the mortgages to ABN in February, months before the company entered bankruptcy. On Aug. 22, shortly after AHM declared bankruptcy, the two companies entered into a stipulation allowing AHM to continue to request up to $32 million for advances to mortgagors. The stipulation approved Wednesday raised that cap to $70 million.

Citigroup moved yesterday to rescue seven affiliated investment funds that have been upended by the running crisis in housing-related debt, the New York Times reported today. As part of its bailout, Citigroup is likely to shift billions of dollars’ worth of securities from the troubled structured investment vehicles onto its own balance sheet early next year. The decision, which reverses earlier statements made by bank executives and in regulatory filings, marks the biggest move yet by a bank to bail out ailing SIVs. Several European banks, including HSBC and Société Générale, have taken similar measures. Citigroup, the largest manager of SIVs, said that it would finance the repayment of debt issued by its vehicles as early as mid-January. Its SIVs hold about $49 billion worth of largely high-grade assets, and the bank expects to unload more over the next year.

Losses on investments weakened by the deepening housing crisis have forced Bank of America to close a multibillion-dollar high-yield fund, the largest of its kind, after wealthy investors withdrew billions of dollars in assets, the New York Times reported today. The fund, run by Columbia Management, had $40 billion in assets last month, but that began to shrink after some of its investments were devalued or frozen, a bank spokesman said. The bank briefly shut off withdrawals after the fund dropped to about $12 billion last week. Bank of America’s fund invested in structured investment vehicles (SIVs), which issue short-term debt tied to home loans, and some of the SIVs were later downgraded by ratings agencies.

American Home Mortgage Holdings Inc. (AHM) filed a notice of the settlement agreements on Friday with the U.S. Bankruptcy Court for the District of Delaware, revealing that if the agreements are approved by the court, the debtors’ estate will receive over $500,000 from parties AHM sued before filing for chapter 11 in August, Bankruptcy Law360 reported yesterday. The largest settlement is to come from United General Mortgage Corp., which AHM sued in three separate cases in various New York district courts in 2007, court documents said. Prior to the litigation, AHM and United General had entered into an agreement under which AHM agreed to purchase mortgage loans from United General. If those loans went into default, United General had an obligation to buy them back from AHM. All three pending suits between the two companies are breach-of-contract disputes in which AHM accused United General of refusing to repurchase loans that were in default because of delinquent early payments.