By Lance Duroni

Law360, Wilmington (January 04, 2012, 7:17 PM ET) -- Ambassadors International Inc., the former owner of Windstar Sail Cruises, won Delaware bankruptcy court approval on Wednesday to settle potential claims against its largest shareholder and secured lender, hedge fund Whippoorwill Associates Inc.

U.S. Bankruptcy Judge Kevin Gross approved the deal, which protects the hedge fund from a lawsuit brought by unsecured creditors in return for $500,000 to cover unpaid professional fees and the release of $400,000 of indemnity claims Whippoorwill held against the debtors.

The official committee of unsecured creditors opposed the settlement, arguing that...