Windstream Gets OK For Up To $24M In Ch. 11 Exec Bonuses
A New York bankruptcy judge Tuesday approved telecom provider Windstream Holdings’ request to pay top executives up to $24 million in bonuses and said the company should use the judge's authority to back its pushback against a competitor's advertising campaign.
U.S. Bankruptcy Judge Robert Drain overrode objections by U.S. Trustee William Harrington and found Windstream had made its case for paying the bonuses, and said customer and employee notices correcting what the judge had called a misleading advertising campaign by competing telecom company Charter Communications should say the campaign was halted by court order.
Windstream filed for Chapter 11 in February after a federal court ruling that a 2015 real estate spinoff left it in default of senior notes and owing a hedge fund more than $310 million.
In April, the company proposed to pay up to $5 million in key employee retention program bonuses to induce certain employees to stay with the company through the Chapter 11 process and up to $20 million in performance-based key employee incentive program bonuses to top executives.
Counsel for the company on Monday told Judge Drain they had made two changes after negotiations with creditors, reducing the maximum incentive bonuses by about $1.1 million and delaying the payment of half of the incentive bonuses until after the Chapter 11 concludes.
Harrington had filed an objection to the proposal, arguing in part that some of the retention bonuses could improperly go to corporate insiders. In court, counsel for the U.S. Trustee's Office argued eligible employees held executive vice president titles and supervised hundreds of employees.
However, at the hearing, counsel for Windstream argued none of the KERP-eligible employees reported directly to the board of directors or had control over corporate policy, and so did not fit the legal definition of "insider."
Harrington also argued the benchmarks for the performance incentives were set too low, saying executives would begin to receive incentives when Windstream's revenues hit a point 10% below the company's 2019 revenue projections.
Windstream, however, argued the company has failed to meet its projections multiple times in the past, most recently in 2017, and the uncertainty caused by the bankruptcy and "increasingly aggressive competition" will mean the company will have to work to reach the 2019 projection.
"Every one of these goals is specifically designed to drive performance," Windstream counsel Brad Weiland argued.
Also on the agenda was the adversary action between Windstream and Charter. Windstream told the court in April that Charter tricked customers into thinking Windstream would be shutting down its service with an advertising campaign that included sending 800,000 mailers urging customers to switch to Charter's Spectrum brand for telecommunication services.
Judge Drain said the letters, which included the text "Goodbye Windstream, hello Spectrum," could appear to have been sent by Windstream based on the appearance of the marketing materials and ordered the campaign halted.
At Tuesday's hearing, the parties reported that Charter employees had received notices telling them not to refer to Windstream's bankruptcy to customers unless asked and that Windstream had sent customers notices that it would continue to provide service, although Windstream counsel said the company was still seeing skepticism and cancellations from its clients.
Judge Drain said new notices should be sent out referring to his order, saying they would be more likely to be obeyed by Charter employees and believed by Windstream customers.
Windstream is represented in the bankruptcy case by Stephen E. Hessler, James H.M. Sprayregen, Marc Kieselstein, Ross M. Kwasteniet, Cristine Pirro Schwarzman, Brad Weiland and John R. Luze of Kirkland & Ellis LLP. It is represented in the adversary action by Terence P. Ross, Tami Kameda Sims and Shaya Rochester of Katten Muchin Rosenman LLP.
Harrington is represented by Paul K. Schwartzberg of the U.S. Trustee's Office.
Charter is represented by John S. Kingston and Brian W. Hockett of Thompson Coburn LLP.
The bankruptcy case is In re: Windstream Holdings Inc. et al., case number 19-22312, and the adversary action is Windstream Holdings Inc. et al. v. Charter Communications Inc. et al., case number 19-08246, both in the U.S. Bankruptcy Court for the Southern District of New York.
U.S. Bankruptcy Judge Robert Drain overrode objections by U.S. Trustee William Harrington and found Windstream had made its case for paying the bonuses, and said customer and employee notices correcting what the judge had called a misleading advertising campaign by competing telecom company Charter Communications should say the campaign was halted by court order.
Windstream filed for Chapter 11 in February after a federal court ruling that a 2015 real estate spinoff left it in default of senior notes and owing a hedge fund more than $310 million.
In April, the company proposed to pay up to $5 million in key employee retention program bonuses to induce certain employees to stay with the company through the Chapter 11 process and up to $20 million in performance-based key employee incentive program bonuses to top executives.
Counsel for the company on Monday told Judge Drain they had made two changes after negotiations with creditors, reducing the maximum incentive bonuses by about $1.1 million and delaying the payment of half of the incentive bonuses until after the Chapter 11 concludes.
Harrington had filed an objection to the proposal, arguing in part that some of the retention bonuses could improperly go to corporate insiders. In court, counsel for the U.S. Trustee's Office argued eligible employees held executive vice president titles and supervised hundreds of employees.
However, at the hearing, counsel for Windstream argued none of the KERP-eligible employees reported directly to the board of directors or had control over corporate policy, and so did not fit the legal definition of "insider."
Harrington also argued the benchmarks for the performance incentives were set too low, saying executives would begin to receive incentives when Windstream's revenues hit a point 10% below the company's 2019 revenue projections.
Windstream, however, argued the company has failed to meet its projections multiple times in the past, most recently in 2017, and the uncertainty caused by the bankruptcy and "increasingly aggressive competition" will mean the company will have to work to reach the 2019 projection.
"Every one of these goals is specifically designed to drive performance," Windstream counsel Brad Weiland argued.
Also on the agenda was the adversary action between Windstream and Charter. Windstream told the court in April that Charter tricked customers into thinking Windstream would be shutting down its service with an advertising campaign that included sending 800,000 mailers urging customers to switch to Charter's Spectrum brand for telecommunication services.
Judge Drain said the letters, which included the text "Goodbye Windstream, hello Spectrum," could appear to have been sent by Windstream based on the appearance of the marketing materials and ordered the campaign halted.
At Tuesday's hearing, the parties reported that Charter employees had received notices telling them not to refer to Windstream's bankruptcy to customers unless asked and that Windstream had sent customers notices that it would continue to provide service, although Windstream counsel said the company was still seeing skepticism and cancellations from its clients.
Judge Drain said new notices should be sent out referring to his order, saying they would be more likely to be obeyed by Charter employees and believed by Windstream customers.
Windstream is represented in the bankruptcy case by Stephen E. Hessler, James H.M. Sprayregen, Marc Kieselstein, Ross M. Kwasteniet, Cristine Pirro Schwarzman, Brad Weiland and John R. Luze of Kirkland & Ellis LLP. It is represented in the adversary action by Terence P. Ross, Tami Kameda Sims and Shaya Rochester of Katten Muchin Rosenman LLP.
Harrington is represented by Paul K. Schwartzberg of the U.S. Trustee's Office.
Charter is represented by John S. Kingston and Brian W. Hockett of Thompson Coburn LLP.
The bankruptcy case is In re: Windstream Holdings Inc. et al., case number 19-22312, and the adversary action is Windstream Holdings Inc. et al. v. Charter Communications Inc. et al., case number 19-08246, both in the U.S. Bankruptcy Court for the Southern District of New York.
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