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Rockall employee bonus plan draws objection from unsecured creditors
By Sarah Lizee
Olympia, Wash., April 26 – Rockall Energy Holdings, LLC’s official committee of unsecured creditors objected to the company’s motion seeking approval of a key employee incentive plan, according to court documents filed Monday with the U.S. Bankruptcy Court for the Northern District of Texas.
The committee said the KEIP can’t be approved in its current form because the first three tiers of performance targets are based on easily-achieved hurdles, so that the KEIP is actually an insider retention bonus plan.
“As a retention bonus plan for insiders, the first three tiers of the KEIP run afoul of the bankruptcy code’s strictures for insider retention plans under section 503(c)(1),” the group said in its objection.
The committee said the KEIP’s first three tiers of net sale proceed targets, which will deliver between $500,000 and $1 million to the debtors management, contain performance thresholds so low as to be “somewhat illusory.”
The KEIP will deliver a total of $500,000 to the debtors’ insider management for achieving a sale transaction with net proceeds in any amount up to $75 million, making management’s receipt of a bonus under the proposed KEIP contingent only upon the closing of any sale.
“While the committee may be supportive of a truly incentivizing KEIP that conditions bonus payments upon management’s willingness to go above and beyond their existing obligations to drive value of these estates, as is the case with the higher tiers of the KEIP, the court should not approve the KEIP as currently proposed,” the committee said.
The Dallas-based oil exploration and production company filed Chapter 11 bankruptcy on March 9 under case number 22-90000.
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