Creditors Oppose Executive Bonuses for Bankrupt Lyondell
HOUSTON (ICIS news)--Creditors protested a multi-million dollar bonus package proposal for Lyondell Chemical executives that was originally scheduled to be heard on Tuesday by a US bankruptcy court.
The hearing has been moved to 11 August.
A creditors' committee wants the bonuses withheld from five officers - the potential defendants in a lawsuit that it plans to file in bankruptcy court. Those officers could earn millions under the bonus plan, the committee alleged.
The officers include Alan Bigman, Edward Dineen, Bart de Jong, James Bayer and Michael Mulrooney. The committee accused them of driving Lyondell into bankruptcy by pursuing a merger with Basell.
As such, the five should not receive bonuses, the committee said in an objection to the bonus package.
"These defendants previously received millions of dollars in connection with the merger that was the cause of these bankruptcy proceedings and ruinous to unsecured creditors," the committee said.
The committee alleged that the merger earned Dineen $8.1m (€5.7m), de Jong $5.1m and Bayer $4.6m.
"The conduct of these defendants in approving the merger and merger-related-subsidiary guarantees contributed to [Lyondell's] insolvency, undercapitalisation and inability to pay debts when due," the committee said.
The committee limited its bonus objection to the five officers.
Lyondell said it would not comment beyond the filings it made in bankruptcy court.
In its court filing, Lyondell proposed four different bonus packages.
One, which includes the contested bonuses, is capped at $45m and would target 325 senior officers and managers. Senior officers could receive at least 120% of their monthly salary if the company achieves a target of $175m/month in earnings before taxes, interest, depreciation, amortisation and restructuring costs (EBITDAR).
Managers would receive 12.5-60%, depending on their rank and if they work in the US, Lyondell said.
A retention bonus-plan capped at $15m would go towards 350 non-executive employees, whom Lyondell deemed to have critical, irreplaceable skills.
A third $1m discretionary bonus-plan would be a modified version of the programme that Lyondell already had before the bankruptcy, the company said. The discretionary bonuses are capped at $10,000/employee.
A hardship plan would go to retirees and their dependents who are struggling under dire financial pressure, Lyondell said.
Members of this fourth group could get up to $40,000 each, Lyondell said. However, they must have potential claims of at least $5,000.
Lyondell expects to spend $2m on the hardship plan.
Lyondell said the bonus packages would would help the company maintain focus, morale and loyalty - all critical for emerging from bankruptcy protection.
The bonuses would also discourage Lyondell employees from accepting positions at the company's competitors, it said.
In particular, the executive bonus plan - capped at $45m - would place the company's compensation plan among the 25th percentile of the market, Lyondell said. Without the bonuses, executive compensation would remain well below market rates.
The hearing has been moved to 11 August.
A creditors' committee wants the bonuses withheld from five officers - the potential defendants in a lawsuit that it plans to file in bankruptcy court. Those officers could earn millions under the bonus plan, the committee alleged.
The officers include Alan Bigman, Edward Dineen, Bart de Jong, James Bayer and Michael Mulrooney. The committee accused them of driving Lyondell into bankruptcy by pursuing a merger with Basell.
As such, the five should not receive bonuses, the committee said in an objection to the bonus package.
"These defendants previously received millions of dollars in connection with the merger that was the cause of these bankruptcy proceedings and ruinous to unsecured creditors," the committee said.
The committee alleged that the merger earned Dineen $8.1m (€5.7m), de Jong $5.1m and Bayer $4.6m.
"The conduct of these defendants in approving the merger and merger-related-subsidiary guarantees contributed to [Lyondell's] insolvency, undercapitalisation and inability to pay debts when due," the committee said.
The committee limited its bonus objection to the five officers.
Lyondell said it would not comment beyond the filings it made in bankruptcy court.
In its court filing, Lyondell proposed four different bonus packages.
One, which includes the contested bonuses, is capped at $45m and would target 325 senior officers and managers. Senior officers could receive at least 120% of their monthly salary if the company achieves a target of $175m/month in earnings before taxes, interest, depreciation, amortisation and restructuring costs (EBITDAR).
Managers would receive 12.5-60%, depending on their rank and if they work in the US, Lyondell said.
A retention bonus-plan capped at $15m would go towards 350 non-executive employees, whom Lyondell deemed to have critical, irreplaceable skills.
A third $1m discretionary bonus-plan would be a modified version of the programme that Lyondell already had before the bankruptcy, the company said. The discretionary bonuses are capped at $10,000/employee.
A hardship plan would go to retirees and their dependents who are struggling under dire financial pressure, Lyondell said.
Members of this fourth group could get up to $40,000 each, Lyondell said. However, they must have potential claims of at least $5,000.
Lyondell expects to spend $2m on the hardship plan.
Lyondell said the bonus packages would would help the company maintain focus, morale and loyalty - all critical for emerging from bankruptcy protection.
The bonuses would also discourage Lyondell employees from accepting positions at the company's competitors, it said.
In particular, the executive bonus plan - capped at $45m - would place the company's compensation plan among the 25th percentile of the market, Lyondell said. Without the bonuses, executive compensation would remain well below market rates.
quoted from: ICIS.com
