Business Bankruptcy: How Has BAPCPA Affected Key Issues
by Lisa J. Donahue
AlixPartners LLP; New York
As Key Employee Retention Programs (KERPs) prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) were criticized for being too generous with low performance hurdles for top executives of companies in chapter 11, the new law placed several new restrictions on KERPs. Some restrictions included having the debtor prove that the employee in question had a bona fide job offer from another business at the same or greater rate of compensation, that the person’s services are essential and that the retention paid does not exceed 10 times the mean amount of similar transfers paid to non-management employees for any purpose, or if not made to non-management employees, then the amount paid to management cannot be greater than 25 percent of the amount paid to such employees from the previous year. Looking at recent court rulings on incentive plan proposals in the Dana Corp. and Calpine proceedings, Dana Corp.’s plan was struck down for its resemblance to a KERP, while Calpine’s plan was approved for its focus on triggers for both operational short-term and intermediate targets, as well as plan emergence.
Read the full article. (Materials from the 2006 BAPCPA One-Year Anniversary Program)
Agenda for the 2007 Annual Spring Meeting
Financial Advisors, Investment Banking and Professional Compensation (Joint):
“Emerging Issues in the Retention and Compensation of Professionals - Is the Playing Field Changing?” and an Interim Report on the ABI Chapter 11 Professional Fee Study
The committees will jointly meet on Friday, April 13, from 2:15-3:45 pm and will report on the professional fee study. In February 2005, ABI announced it was funding a grant of $350,000 for an empirical study of professional fees in chapter 11 cases ("Fee Study"). For the last two years, Prof. Stephen Lubben of Seton Hall University School of Law (the Fee Study's reporter) has been gathering data from more than 1,000 chapter 11 bankruptcy cases to use in analyzing various issues related to professional fees. During this process, Prof. Lubben has been assisted and supported by numerous ABI members who form the Fee Study's Steering Committee and Practitioner's Panel. A major report on the progress and some initial draft findings from the Fee Study will be presented, the most important preliminary report on the Fee Study prior to the release of the Final Fee Study results in Late 2007. Please plan on attending this important report on chapter 11 professional fees.
Hon. James D. Gregg, Moderator (U.S. Bankruptcy Court, W.D. Mich.; Grand Rapids); Rick Cieri (Kirkland & Ellis LLP; New York); Rick Chesley (Paul, Hastings, Janofsky & Walker LLP; Chicago); Peter Fishman (Houlihan Lokey Howard & Zukin; San Francisco).