Unsecured creditors and the unionized workforce of Mission Coal Co. LLC filed objections to two incentive programs the company proposed to retain employees during its bankruptcy sale process.
Mission Coal asked the U.S. Bankruptcy Court for the Northern District of Alabama to approve two plans on Nov. 28: a key employee incentive plan, or KEIP, and a key employee retention plan, or KERP. The KERP is a $1.1 million proposed incentive program that Mission said is designed specifically to retain 40 "critical non-insider employees" through the reorganization, while the KEIP provides up to $281,875, depending on certain sales metrics, to encourage two senior members of management to meet "challenging sale-related process and pricing goals."
"The debtors have already lost certain employees due to the uncertainty associated with these Chapter 11 cases and cannot afford to lose anymore, and customary annual bonuses to these employees have not been paid since 2017 due to liquidity constraints," Mission Coal noted in part of its justification for the KERP program. The company is seeking approval from the court to enter into a stalking horse purchase agreement, setting a $145 million credit bid as a floor for a potential auction sale.
A committee of Mission's unsecured creditors wrote in a Dec. 12 filing that they do not object to the broader KERP program, but do object to KEIP bonuses they said are unnecessary and duplicative of pre-petition bonuses that were paid to the same two executives on the eve of the company's bankruptcy. Just two days before the petition date, the unsecured creditors wrote, Mission doled out $1.5 million in bonuses to three top executives, including the two who would benefit from the new program: Gary Broadbent, the general counsel and vice president of human resources, and Vice President of Accounting Alan Jones.
"The proposed KEIP does not properly incentivize the debtors' executives to achieve significant value-enhancing performance during the pendency of these Chapter 11 cases," attorneys for the unsecured creditors wrote. "Moreover, the proposal to reward two executives who each received payments of $365,000 a mere two days before the petition date is unseemly, at best."
The payments made to Jones and Broadbent, the filing said, resulted in Mission "effectively draining" its bank account to just $55,000 while leaving the debtors unable to pay their employees.
The United Mine Workers of America, or UMWA, the union representing some of those employees, said it was not consulted in the design of the retention plans and urged the rejection of both of the proposed programs.
"The UMWA represents over half of the debtors' current workforce and not one employee is deemed worthy," the UMWA wrote in its filing. "The proposed plan appears to be designed to provide bonuses to management-level employees only and is not tailored to debtors' purported goal to keep its critical workforce intact until the proposed sale process is complete."
The union noted that bankruptcy filings suggest Mission Coal has lost millions of dollars in each of the nine months it has existed in its present form. "The very leaders who have caused such a catastrophe are now sought to be rewarded," UMWA wrote. While other bankruptcy filings show Jones has been with the company since January 2017, Broadbent, the former spokesman for Murray Energy Corp., only started working with Mission this past summer.
At the same time that Mission Coal is seeking the incentives, it has asked the bankruptcy court to reject a collective bargaining agreement with the UMWA.
"While these tactics may be temporarily successful, debtors will incur financial liabilities in the future when the consequences of such tactics, through grievances, arbitrations, and related claims, come home to roost," the UMWA warned. "No evidence is provided regarding how the debtors decided that nearly 400 bargaining unit employees who report to work each day at these mines were not critical to operations."
Westmoreland Coal Co., also in the middle of a bankruptcy restructuring, recently asked the court to approve an employee incentive program as well.