In papers filed Tuesday with the U.S. Bankruptcy Court in Manhattan, U.S. Trustee Diana G. Adams said the proposal attempts to bypass bankruptcy law provisions that prohibit bonuses designed to simply retain top workers.
Adams said "there can be no concealing" that the proposed bonus plan, which would pay the executives and a larger class of Wellman mangers bonuses tied to the company's sale price, is simply a retention plan.
Changes to the Bankruptcy Code that took effect in 2005 put strict limits on the type of bonuses that companies can pay their top executives. Bonuses intended to keep top employees, or insiders, were sharply curtailed by the new provisions.
Adams said Wellman's plan "improperly attempts to bypass these important new provisions by recharacterizing the proposed bonuses as financial 'incentive' payments."
Adams asked the bankruptcy court to throw out the bonus plan, which could pay out as much as $6.2 million in total if Wellman's assets sell for more than $550 million. A court hearing on the bonus plan is scheduled for April 15.
Wellman, which entered Chapter 11 protection in February, sought approval to pay the sale-tied bonuses because plans to sell its assets or reorganize by Aug. 15 have put a "tremendous burden" on the executives.
Wellman's lenders have set a mid-August deadline for the plastics manufacturer to sell its assets or complete a stand-alone reorganization. The company said a sale is the "most likely outcome." It has received non-binding offers from a "number of buyers" and is in the process of selecting a stalking-horse bidder to open an auction for its business.
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