Furniture Brands seeks to pay key employee bonuses
David Perry -- Furniture Today, September 16, 2013
ST. LOUIS — Furniture Brands International last week asked for key employee bonuses for executives and other workers "essential" to its operations, management and sales during Chapter 11 bankruptcy.
Not uncommon in bankruptcy cases, such bonuses are offered to incentivize successful restructuring and creditor recovery. Without them, FBI said in its motion, the company could be forced into "a fire sale mode and chaotic liquidation that will erode what value exists."
Also, Furniture Brands noted that in the past month, four employees who'd been slated for participation in the key employee retention plan it planned to file had already left the company. A hearing on the motion is set for Oct. 2.
While it does not list by name who would receive the bonuses, the motion was filed for 55 employees. It lists two classes of bonuses separated into seven executives and 48 non-insiders. Non-insiders are employees who do not have inside information about the company.
For insiders, FBI set two incentives: one based on sale proceeds and the other on liquidity. If the threshold sales targets are not met, the incentives are not paid. Insiders also receive an "administrative expense priority" in the case.
FBI's sales targets to meet the incentives were blacked out in its motion. If a buyer meets the minimum bid set in the motion, insiders will draw from an incentive pool totaling $375,000. If a buyer reaches a maximum - or "stretch" - target offered in the motion, the pool maxes out at $1.7 million.
The second incentive is based on liquidity and essentially awards cash conservation by FBI during bankruptcy. It offers the same monetary incentive as the prior sales proceeds incentive and is based on debtor-in-possession funding needs at the time of a sale date.
The retention payments for 48 non-insiders include 19 of FBI's 36 vice presidents and brand presidents. They include business development, sales and marketing, finance, human resources, legal, technology, supply chain and operations personnel.
The cost of the retention plan is estimated at $2.1 million and requests a "discretionary pool" of $225,000 for employees who may be added later.
The average retention payment for non-insiders would be $40,620, according to the motion. It estimates a retention period of six months.
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