Borders Bankruptcy Judge Approves Bonus Plan for Executives
April 22, 2011, 6:00 PM EDTBy Tiffany Kary
(Updates with judge’s comment in third paragraph.)
April 22 (Bloomberg) -- Borders Group Inc. won approval of an amended executive bonus plan after a judge sought changes to resolve objections from an arm of the U.S. government that oversees bankruptcies.
U.S. Bankruptcy Judge Martin Glenn approved the bonuses in an order entered in Manhattan court today. At a hearing April 14, the bankrupt bookstore operator had proposed bonus payments that tied rewards for top executives to recoveries for creditors. Glenn had sought additional changes to resolve objections from the U.S. Trustee, a bankruptcy watchdog for the Justice Department.
The revised plan is “is in the best interests of the debtors, their estates, and creditors,” Glenn said in the order.
According to an exhibit outlining the bonuses, employment agreements for four executives, including Chief Financial Officer Scott Henry, will be withdrawn and their employment agreements won’t be assumed. Ten participants in the bonus plan will be paid a bonus of 40 percent to 125 percent of their base salary if the company achieves certain benchmarks, according to court papers.
Rent Reductions
The low range of bonuses will be paid if Borders negotiates at least $10 million in annual rent reductions on its store leases, and senior management will get 125 percent of their base salary if they recover more than $95 million for unsecured creditors.
Andrew Glenn, a lawyer for Borders and no relation to the judge, said in a phone interview that the bonuses will be about $6 million near the high range, and noted that Henry and other executives will continue with the company and have a new employment agreement.
“We think this resolution will ultimately benefit the company,” Glenn said.
The trustee had said the bonuses were premature because Borders has only been in bankruptcy two months and hasn’t shown how it will reorganize or pay unsecured creditors.
Borders, the second-largest book chain after Barnes & Noble Inc., filed for bankruptcy in February and has since begun closing about 225 stores, about a third of its total.
The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--Editors: Michael Hytha, Mary Romano
To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.
