A U.S. judge rejected a plan to compensation huge amount in bonuses to top management of bankrupt firms including GT Advanced Technologies Inc (OTCMKTS:GTATQ) and Molycorp Inc (OTCMKTS:MCPIQ). Molycorp, which seek bankruptcy protection in June, had stated the bonus plan would support executives’ objectives with those of its creditors to sustain the value of businesses.
The details
Last week, Judge Henry Boroff for the second time rejected GT’s proposal to compensate up to $2.2 million in bonuses. He said that in essence, the company’s insider look for bonus payments for performing a task they are already required to do. Large bankrupt firms often want approval for bonuses, but board members and top executives who are considered “insiders” can only join if the proposal includes tough targets, rather than just retention compensation.
For instance Electronics retailer firm RadioShack allocated $2.3 million for insider bonuses in its bankruptcy reorganization. It did not reveal the names of eligible personnel when it presented the bonus plan, which compensated out in part as some outlets survived the bankruptcy.
The view
Judge Sontchi said that he believes in incentive program for executives. Last year, he approved a plan presented by bankrupt Texas power firm Energy Future Holdings Corp. The firms filing for bankruptcy have expressed that the incentive programs are important in rewarding and encouraging top talent, especially during a crisis.
In fact, the companies need to compensate cash bonuses as their stock-based compensation programs are considered worthless by the bankruptcy. However, Boroff in the GT Advanced ruling called the argument as “insensitive” to shareholders. Still, the bonuses plans are largely approved, mostly if they are tailored to win creditors’ support, something that Molycorp lacked.
In last trading session, the stock price of GT Advanced gained more than 1% to close the trading session at $0.355. The gains came at a share volume of 726,528 compared to average share volume of 2.60 million.
GT Advanced Technologies Inc (OTCMKTS:GTATQ) has just bounced from a major support and increased the chances of seeing bounce in the short term as it ended the last trading session with a gain of 1.43%. The volume of the day at 726,000 was very low compared to the daily average of 2.8 million, which could be taken as a very normal occurrence in a corrective phase. If this latest retesting of the swing low around $0.30 is nothing more than a correction, then not only the low volume pattern of the last few days would be perfect, a sharp bounce would be the strongest possibility.
