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No Moral fiber,
Shame it used to be a Great company
No payment of the bonuses they mentioned in the objection have been paid, they are part of the bankruptcy settlement that the judge has to approve. Note also that the unsecured group reps have come to an agreement after the plan was changed to pump up that pool.
The part that bugs me: if they're going to exit with comp, it should be equity, not cash. That is, give them "stock" in the new company.
The terms of Mr. Kennedy’s Agreement, which is essentially a golden
parachute, provides for receipt of a minimum payment of $4.375 million in his first
year and $8.75 million over a two year period.3 The terms of Mr. Chirico’s
Agreement provides that he will earn a minimum of $6.25 million in his first year
as President and CEO and a minimum of $10 million over a two (2) year period.4
3 This equals fees of $1.9 million for each of the two years as compensation and a minimum bonus of $2.475 million for each of those two years.
The lack of any discussion in the Disclosure Statement is particularly
troubling because Mr. Kennedy and Mr. Chirico, as two of the Debtors’ most senior
executives (with Mr. Kennedy also a Board member), presumably negotiated their
own Agreements at the same time that they were negotiating the Plan and PSA on
behalf of the Debtors. Without any information as to how the terms of these
Agreements were established and approved by the Board, it appears that Mssrs.
Kennedy and Chirico were actively negotiating to enrich themselves through the
Agreements at the same time they were supposed to be acting as fiduciaries
negotiating the terms of the Plan, PSA and creditor recoveries.
Notably, the post-emergence compensation and bonuses contemplated in the
Agreements total $10,625,000 in year one, which is roughly forty percent (40%) of
the entire $25 million General Unsecured Recovery Pool. For the two year period,
the compensation and bonuses total $18,750,000, or approximately seventy five
percent (75%) of the General Unsecured Recovery Pool, which is projected to pay
creditors just eight percent (8%) of their allowed claims.5 If the Debtors posit that
these facts do not create a conflict of interest, the Disclosure Statement should set
forth their rationale and legal basis for this conclusion.
Trustee is either doing the job or going through the motions. The bonuses where slammed but still paid.