portsmouth-dailytimes.com

USEC pays $30 million in bonuses while filing bankruptcy

By Frank Lewis

April 9, 2014

By Frank Lewis


flewis@civitasmedia.com


A USEC official has confirmed to the Daily Times that USEC Inc. paid more than $30 million in bonuses and other compensation to high-ranking executives, other employees, and bankruptcy advisers before filing for Chapter 11 protection this year.


“The payments to insiders, which is a required filing as part of the bankruptcy process, looks back at payments to anyone who is senior management or on the board of directors for the previous 12 months,” USEC Inc. Vice President of Communications Paul Jacobson said. “With regard to those payments, in 2013, we faced a series of really critical short term challenges that if they were not met could have threatened the future of the company.”


Jacobson said USEC had approval from an independent advisor to its board of directors, and through that advice, the board authorized a temporary change to the company’s compensation program that would essentially align short term bonuses with short term goals for the company.


“So as part of this temporary change in the compensation program, executives, in exchange for some of these short term bonuses, gave up some significant amounts of some long term compensation that was previously available,” Jacobson said. “These payments are based upon surveys within the norms of a company that has $3 billion of revenue over two years, and this adjustment of timing from a long term to a short term approach was implemented over a wide number of salaried employees in the company of varying ranks and not just at the executive levels.”


Jacobson said it was all in an effort company-wide to focus on the need to achieve short term goals he said were necessary to keep the company operating.


“That 12-month look-back that was part of the bankruptcy filing, included some 2012 payments that were disbursed in 2013 and some miscellaneous reimbursements like reimbursements for travel. So there’s a lot of detail in that number that isn’t revealed by just an initial glance at the bottom line,” Jacobson said.


Jacobson said that since USEC deals with a lot of complicated issues that accompany the process of restructuring, a lot of professionals were required including lawyers, accountants and others leading to other compensation including bonuses.


“What became a prearranged Chapter 11 filing had garnered overwhelming support from the creditors, and it required a significant amount of professional services. There’s no doubt about it,” Jacobson said. “Of that $16 million or so that we paid to advisers, about $5 million of it about a third of it was actually to pay for the attorneys and advisers for the creditors, not for USEC. In other words, we had to pay for our professional services as the debtor. But we were also required to pay for the professional services of the creditors.”


Jacobson said that arrangement is relatively common in bankruptcy proceedings and that large professional fees are common in large bankruptcy proceedings. He said the fees alone in the Lehman Brothers bankruptcy topped $2.2 billion.


“For those who are not familiar with bankruptcy those types of fees are not uncommon in this environment,” Jacobson said.


Jacobson said it is important for people to know the figures included some of 2012 and all of 2013 and was all part of the attempt to restructure compensation into a more short term focus environment since the company had to achieve short term goals.


Frank Lewis can be reached at 740-353-3101, Ext. 252, or on Twitter @FrankLewispdt.