A New York bankruptcy court judge Thursday withheld a decision regarding a disputed proposal that would grant up to $5.3 million in bonuses to eight Hawker Beechcraft senior executives in a Key Employee Incentive Plan.
The judge asked for a written summary of the testimony from the hearing before he rules on the matter.
At the same time, he approved an additional $1.9 million in bonuses for 31 other management-level employees at Hawker Beechcraft, in a Key Employee Retention Plan.
The company filed for Chapter 11 bankruptcy on May 3.
The Justice Department’s bankruptcy watchdog agency and the Machinists union filed objections this week to the bonus plan.
In its filing, the union said it would not lose sight of the “complete irony and hypocrisy” of a motion seeking to give millions in bonuses to executives as the company struggles to survive.
“If this motion is approved, the Beechcraft Eight can rightfully take their place as the newest poster boys for corporate greed and excess in the United States,” Ron Eldridge, the union’s aerospace coordinator, said in a statement Wednesday.
The company defended the proposal in a document filed with the court before the hearing, saying the payments are appropriate because there is significant work to do before the company emerges from bankruptcy.
“The tremendous progress made to date demonstrates that the (senior leadership team) is a highly talented and capable group,” the filing said.
The bankruptcy court earlier approved an exclusivity agreement with Superior Aviation Beijing so Hawker Beechcraft could pursue a sale of the business to the China-based company for $1.79 billion. The sale would not include the defense business.
Pursuing the proposal involves obtaining multiple regulatory approvals, carving out the defense business, negotiating with key parties to preserve important business relationships, responding to diligence requests, drafting and negotiating a definitive purchase agreement and, if an agreement is reached, conducting a competitive auction to try for higher or better offers, the filing said.
At the same time, the senior leadership team must work on a plan to emerge from bankruptcy as a stand-alone company.
That will require securing support for the plan from creditors, resolving the treatment of the company’s three defined benefit plans, negotiating the terms of a new retirement plan and getting commitments for financing to emerge from Chapter 11.
A stand-alone plan also means implementing an “orderly shut down” of the business jet business, which will include facility closures and reductions in force, the filing said.
Leadership must also have operational successes of the business, as the end of the calendar year is the most important sales period, it said.
“The debtors (Hawker Beechcraft) must incentivize the (senior leadership team) to achieve the targets set forth in their long-term business plan in the face of, among other challenges, a supply chain that has experienced disruption as a result of the … chapter 11 filing and continued weakness and substantial weakness in the aerospace sector,” the filing said.
It said that, in order for any bonuses to be paid, the company must consummate the standalone plan before Dec. 15 or close the sale of the company before Jan. 15.
The company urged the bankruptcy court to overrule the objections from both the Machinists union and the Justice Department’s U.S. Trustee agency, which is tasked with overseeing bankruptcy cases. Both have challenged the bonus plan, contending it is essentially a “disguised retention plan" that does little other than reward managers for staying during bankruptcy reorganization.
U.S. Trustee Tracy Hope Davis argued there must be other factors such as “challenging standards" or “high hurdles" for debtors to overcome before they can be paid bonuses, and that Hawker Beechcraft’s bonus plan did not meet those standards.
Contributing: Associated Press