The federal agency that oversees bankruptcy cases is objecting to proposed bonuses for RG Steel executives that could add up to more than $20 million.
The U.S. Trustee Program said in court papers that the request by the Sparrows Point steelmaker, to be split between 10 "key members of the management team," doesn't qualify as an expense that should be given priority. One of the agency's trustees wrote the proposed bonus plan doesn't offer an incentive for the executives to up their performances — only encourage them not to leave before assets are auctioned off.
The bonuses could work out to an average of just over $2 million per employee. The executives would begin receiving the money after the first-lien debt is paid, according to the filing late Friday by Roberta A. DeAngelis, a U.S. trustee based in Philadelphia.
RG Steel, in the midst of laying off about 2,000 employees at Sparrows Point, said in its request that management "is committed to seeing the sale and chapter 11 process through, but deserves a reasonable and appropriate incentive to continue to perform at the highest levels."
Because the company is trying to put the names of bonus-eligible executives under seal, they haven't been disclosed in court filings.
DeAngelis objected to the seal request as well as the plan itself. She said in court documents that RG Steel has already suggested that paying off the first-lien debt would be "easily achievable" because that group of lenders is oversecured — and that would be the threshold to start getting bonus payments.
The proposal appears to be structured "more to induce certain 'key' employees to remain in the Debtor's employ until a sale takes place than it is for the purpose of preserving the value of the estate or increasing the sale price of the Debtor's assets," DeAngelis wrote.
An auction for the Sparrows Point mill is expected in either late July or August, depending on whether an initial, "stalking horse" bidder emerges.