Celadon Group is seeking to pay up to $900,000 total in bonuses to three executives to wind down the bankrupt company’s sprawling North American transportation businesses, court filings show.
While many of the details of the proposed payouts and the identities of the executives remain sealed in U.S. federal bankruptcy court, Celadon disclosed the cost in a Canadian court filing last week.
The bonuses also face resistance from the federal U.S. trustee appointed to Celadon’s case, who is fighting both the payments and their court seal. A hearing on the matter is set for Thursday.
Celadon is leaning on the executives “to make extraordinary efforts to manage and implement a successful wind-down and to maximize distributions to creditors,” the company said in a Jan. 7 filing in U.S. bankruptcy court.
The proposed bonuses, paid under a Key Employee Incentive Plan (KEIP), are commonplace in large U.S. corporate bankruptcies, as are seven-figure payouts for executives. But the practice also is controversial.
The U.S. trustee in Celadon’s bankruptcy, Andrew Vara, filed a motion on Friday opposing the proposed payouts and the court seal.
Celadon did not provide “an adequate record that the proposed metrics are truly incentivizing, and that the design of the program is consistent with market compensation for similarly situated participants,” Vara, a U.S. Department of Justice trial attorney, wrote in the filing.
Vara also argued that the court-imposed seal on the bonus plan, made at Celadon’s request, “keeps too much information related to the KEIP out of public view, which is inconsistent with congressional intent for the scrutiny of executive bonus programs approved during chapter 11 cases.”
Celadon noted in its Jan. 7 filing that the company “would be unable to achieve significant value” without the three executives, who “possess irreplaceable skills and experience.”
The successful sale of Celadon’s lone operating trucking business, Taylor Express, hinges on retaining the executives, the company said.
Celadon disclosed the proposed bonuses in a court filing to secure recognition of its U.S. bankruptcy in Canada on Thursday under pressure from more than 200 former employees of its Canadian subsidiary, Hyndman Transport.
Celadon Group filed for Chapter 11 bankruptcy protection Dec. 9, shutting down most of its trucking operations in the U.S., Canada and Mexico. The company has moved quickly to sell off its assets, some through so-called stalking-horse deals with prearranged buyers.
A recently unsealed lawsuit alleges that Celadon was insolvent in November and spent millions of dollars from receivables intended for the Alabama company TA Dispatch.