A bankruptcy judge in New York approved Windstream Holdings Inc.'s request to use up to $24 million for bonuses for top executives, including CEO Tony Thomas and CFO Robert Gunderman.
The Little Rock telecommunications company will set aside $18.9 million as bonuses for its top five executives if they hit their 2019 goals. That request had been $20 million, but Windstream agreed to reduce that amount.
Judge Robert D. Drain, of the U.S. Bankruptcy Court for the Southern District of New York, also will allow Windstream to use up to $5 million as bonuses to keep "key employees," according to the company's bankruptcy filing. Windstream said in the filing that it has lost some key employees and others have been aggressively pursued by other employers, including Windstream's competitors.
Windstream filed Chapter 11 bankruptcy reorganization in February, less than two weeks after a New York hedge fund, Aurelius Capital Management, received a $310 million judgment against Windstream's subsidiary, Windstream Services LLC. Aurelius said that Windstream's 2015 spinoff of its fiber and copper assets into a separate company ran afoul of bond covenants.
On April 23, Windstream asked for the bankruptcy court's approval to keep its Key Employee Incentive Program, which provides incentives for five Windstream executives to hit their 2019 goals. In addition to Thomas and Gunderman, executives subject to the KEIP are Layne Levine, president of enterprise and wholesale; Jeff Small, president of Windstream's Kinetic business; and Kristi Moody, executive vice president, general counsel and corporate secretary.
In its filing, Windstream argued that the company believes that "appropriate, incentive-based compensation opportunities remain an important tool to drive performance."
"In addition to their substantial day-to-day responsibilities, these individuals have generally seen their workloads expand significantly as a result of the commencement of these chapter 11 cases ...," the filing said. "... [T]he additional challenges these responsibilities post should be factored into consideration of the KEIP participants' ability to achieve targeted business performance."
Windstream's request didn't go unnoticed. On May 3, U.S. Trustee William K. Harrington, filed an objection, saying that its performance metrics for the bonuses "are well below" the company's current financial projections.
Windstream disagreed. It said its filing on May 13 that the two bonus programs were "critical to the ongoing success" of the company. Judge Drain agreed.
"We are pleased with the court's approval of the performance incentive and retention plans, as well as the progress to date in the reorganization process," David Avery, a Windstream spokesman, said in an email to Arkansas Business. "The company intends to move through the process as quickly and efficiently as possible."
The court's approval came a day before Windstream posted a $2.3 billion quarterly net loss.