On Friday, U.S. Bankruptcy Judge Robert Drain signed of on $37.7 million in bonuses for Frontier Communications' executives as the telco works its way through Chapter 11 bankruptcy.
According to a story by Law360 (pay wall applies), Drain approved the bonuses because they appeared to be in line with industry standards, and were not targeted towards company insiders. The employee bonus plan includes paying up to $14.7 million in retention bonuses, up to $21 million in incentive bonuses based on the company's fiscal performance, and a $2 million reserve that would be set aside for newly hired employees or employees not currently covered.
According to Law360, Frontier's bonus program would also pay middle management employees that the company considers vital to its operations between $30,000 and $233,000 each. Frontier's counsel, Stephen Hessler, said the bankruptcy filing and the coronavirus pandemic made the bonuses even more important as Frontier seeks to retain key employees.
During a telephone hearing, Judge Drain approved the proposed bonus plan over an initial objection from the U.S. Trustee's Office after hearing two creditor groups had dropped their objections once Frontier agreed to adjust the payment schedule, according to Law360.
Frontier filed for Chapter 11 bankruptcy protection on April 15 to kick-start a prearranged $10 billion debt-cutting proposal backed by its bondholders. Frontier announced it had entered into a Restructuring Support Agreement (RSA) with bondholders representing more than 75% of its $11 billion outstanding unsecured bonds
Under the terms of the RSA, Frontier said its trade vendors would be paid for goods and services provided both before and after the Tuesday's filing date. Frontier filed in the U.S. Bankruptcy Court for the Southern District of New York.
Frontier is still in negotiations with creditors who objected to its proposed debtor-in-possession financing. Frontier's goal is to reduce its debt by more than $10 billion.
Frontier CEO Bernie Han, who replaced longtime CEO Dan McCarthy December, has met with creditors and advisors since the start of this year in order to find a path out of Frontier's $17.5 billion debt load. Frontier said to its investors that its lack of fiber and reliance on copper-based broadband services led customer churn, among other factors for filing for Chapter 11.