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On Eve of Bankruptcy, US Firms Shower Execs With Bonuses

Reuters

   Nearly a third of more than 40 large companies seeking U.S. bankruptcy
   protection during the coronavirus pandemic awarded bonuses to
   executives within a month of filing their cases, according to a Reuters
   analysis of securities filings and court records.

   Under a 2005 bankruptcy law, companies are banned, with few exceptions,
   from paying executives retention bonuses while in bankruptcy. But the
   firms seized on a loophole by granting payouts before filing.

   Six of the 14 companies that approved bonuses within a month of their
   filings cited business challenges executives faced during the pandemic
   in justifying the compensation.

   Even more firms paid bonuses in the half-year period before their
   bankruptcies. Thirty-two of the 45 companies Reuters examined approved
   or paid bonuses within six months of filing. Nearly half authorized
   payouts within two months.

   Eight companies, including J.C. Penney Co. Inc. and Hertz Global
   Holdings Inc., approved bonuses as little as five days before seeking
   bankruptcy protection. Hi-Crush Inc., a supplier of sand for
   oil-and-gas fracking, paid executive bonuses two days before its July
   12 filing.

   $10 million in payouts

   J.C. Penney -- forced to temporarily close its 846 department stores
   and furlough about 78,000 of its 85,000 employees as the pandemic
   spread -- approved nearly $10 million in payouts just before its May 15
   filing. On Wednesday, the company said it would permanently close 152
   stores and lay off 1,000 employees.

   The company declined to comment for this story but said in an earlier
   statement that the bonuses aimed to retain a "talented management team"
   that had made progress on a turnaround before the pandemic.

   The other companies declined to comment or did not respond. In filings,
   many said economic turmoil had rendered traditional compensation plans
   obsolete or that executives getting bonuses had forfeited other
   compensation.

   Luxury retailer Neiman Marcus Group in March temporarily closed all of
   its 67 stores and in April furloughed more than 11,000 employees. The
   company paid $4 million in bonuses to Chairman and Chief Executive
   Geoffroy van Raemdonck in February and more than $4 million to other
   executives in the weeks before its May 7 bankruptcy filing, court
   records show.

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