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US bankruptcy watchdog takes aim at oil refiner's executive bonus plan
[NEW YORK] A plan to pay seven executives of the bankrupt Philadelphia Energy Solutions (PES) oil refiner as much as US$20 million in bonuses after the company shut its operation and laid off its workforce should be rejected, the US government's bankruptcy watchdog said on Friday.
The proposed key employee incentive plan has not proven to be necessary or standard, particularly as the executives were given millions in retention bonuses just days before the company collapsed into Chapter 11 bankruptcy, according to a filing in US Bankruptcy Court in Delaware by the US Trustee Program.
"The almost US$6 million in already-paid bonus payments is already excessive," Trustee Andrew Vara said in the filing.
PES spokespersons were not immediately available for comment.
PES entered bankruptcy a month after a June 21 fire at its 335,000 barrel-per-day oil refinery in South Philadelphia shut the plant. Roughly 1,000 workers were laid off without severance pay or health benefits, while two weeks' transition pay was negotiated for some of the refinery's 640 union workers.
The company's top managers would receive a minimum of US$2.5 million and as much as eight times that amount in bonuses, above salaries and other expenses, as part of the plan proposed in court last month.
The latest round of bonuses would be paid if PES confirms a reorganisation within 15 months of its bankruptcy filing or if it secures at least US$300 million in net proceeds from a sale, insurance proceeds or other payments.
Bonus payments to the executives would increase by 2.5 per cent on anything above the US$300 million in proceeds minus expenses.
PES is currently battling for as much as US$1.25 billion in property damage and loss of business insurance, in addition to seeking a sale of its assets.