American Airlines Seeks to Tap Claim Reserves to Pay Shareholders

Wednesday in New York, American Airlines Group Inc. will ask a judge if it can distribute more than $230 million in stock it had set aside for claims disputes in its predecessor’s chapter 11 case.

Lawyers for AMR Corp., the prior iteration of American, say the reserve fund to pay off the disputed claims would still contain more than $290 million in stock. The money would go to those who held the company’s equity before it merged with US Air ways Group Inc.

In addition to the approximately $237 million that would go to equity holders, an additional $73.1 million in stock would go to those holding certain union-related claims.

American’s lawyers have said that without the approval of Judge Sean H. Lane, shareholders would be “unnecessarily deprived of their pro rata share of the excess reserve funds in the disputed claims reserve.”

Thursday in Manhattan, a judge will decide whether to approve a deal that could free up $93 million for victims of the Bernard Madoff Ponzi scheme.

Irving Picard, the official tasked with liquidating Mr. Madoff’s defunct firm, said last month that the fund, Defender Limited, and related entities have agreed to return the $93 million they received from investing with Mr. Madoff. The fund invested exclusively with Mr. Madoff’s firm. Under the terms of the deal, the amount will be withheld from a $522.8 million recovery that Defender is in line to receive for money it lost from the fraud.

The deal is the latest of several Mr. Picard has struck with so-called feeder funds, which pooled investors’ cash and then funneled the money to Mr. Madoff. Phony returns were later paid out to the feeder funds, which then distributed the money among their individual investors.

Next week on the Internet, the remains of an Energy Department-backed biorefinery plant in Maine formerly owned by embattled private-equity chief Lynn Tilton will go up for auction.

According to notices posted by New Mill Capital and Joseph Finn Co., which are running the auction, interested parties can bid on the assets online from April 14 to April 16.

The plant, a pilot project to turn wood byproducts into ethanol fuel, was still in the exploratory phase when the paper plant that launched it, the Old Town Fuel & Fiber Mill, was pushed into involuntary bankruptcy last fall by a group of creditors.

In December, Ms. Tilton’s Patriarch Partners sold the rest of the then-shut Old Town mill for $10.5 million to a Wisconsin paper manufacturer, but the biorefinery plant wasn’t included in that sale.

-Sara Randazzo contributed to this article.

Write to Joseph Checkler at [email protected]. Follow him on Twitter at @JoeCheckler