WASHINGTON — Joppa, Md.-based Merry-Go-Round Enterprises filed a motion in Federal bankruptcy court Friday for approval of the compensation packages of two new executives.
The motion for the first time set the distributable value for the company upon emergence from bankruptcy. It is in the $200 million to $340 million range.
The creditors’ committee does not support the motion, which ties the bonus levels of Thomas C. Shull, set to become chairman and chief executive officer, and James Kenney, who will be chief operating officer, to the company’s distributable value.
The bonus would be reduced by 25 percent if the company did not file a reorganization plan by Feb. 28, 1996, and by 50 percent if it failed to file a plan by July 31, 1996. Creditors are pushing for a deadline as early as mid-1995.
A Dec. 8 confirmation hearing for the two officers was postponed until Jan. 5 due to wrangling over the bonuses. Shull and Kenney helped negotiate R.H. Macy & Co.’s bankruptcy plan.
MGR management is meeting with creditors Tuesday to try to work out a deal, Shull said in a telephone interview Friday. But the equity committee’s counsel, Stephen Selbst, said the creditors were “miles away” from agreeing with the motion.
The judge is likely to accept the motion even without creditors’ support because “the debtors will be able to persuade the court they need Kenney and Shull in there,” said Selbst, a partner with Berlack, Israels & Liberman in New York.
The motion sets the stock bonus at 2 percent of MGR’s distributable value if the value is $340 million or more at the time of emergence. The executives’ bonus will equal 1 percent if the value is between $280 million and $339 million, and 0.5 percent if the value is between $200 million and $279 million. They will receive no stock if MGR’s value is less than $200 million.
The executives will receive a $2 million cash bonus if the company’s distributable value is at least $340 million, $1 million if it is worth $280 million to $339 million and nothing if it is valued at less than $280 million.
“I am confident that, if given enough time, Kenney and Shull can comfortably exceed $340 million in value, but they need time and it is our mission to give them the time,” said Selbst. At its high point, MGR was worth in the neighborhood of $1 billion, he said.
— Fairchild News Service