« Bankruptcy judge approves American restructuring plan, says CEO Horton's $20 million compensation should not be part of the plan | Main | DFW Airport CEO reflects on 20 years in the top job »

September 13, 2013

Judge issues written ruling on AMR CEO Horton's severance payment

U.S. bankruptcy judge Sean Lane issued his written ruling on why he denied AMR chief executive Tom Horton's $19.875 million severance package as part of the company's restructuring plan.

On Thursday, Lane approved the restructuring plan of American Airlines' parent company which includes a merger with US Airways. He also sided with the U.S. bankruptcy trustee who had objected to Horton's severance payment saying it did not conform with the bankruptcy code.

In his written ruling, Lane said he sees the value of Horton's management of AMR while it was in bankruptcy but does not agree that a retention payment should be made to keep Horton on the board after the merger.

The filing went on to say:

"In fact, the Debtors entered into a pre-petition agreement with Mr. Horton whereby he was to receive a maximum of $15.3 million dollars if the company was involved in a merger. See Trustee Objection at 14-15. It is unclear why Mr. Horton should receive $4.5 million more now than was contemplated when he took the reins of the Debtors on the eve of the Chapter 11 filing less than two years ago, presumably negotiating that prior agreement with these bankruptcy cases in mind. Moreover, in considering the facts of this case, there have been significant sacrifices by the Debtors’ employees, most notably by its union members, that allowed the Plan to move forward. These sacrifices should be considered in evaluating the reasonableness of this proposed payment, notwithstanding the very favorable recoveries provided by the Plan to creditors and equity holders."

Click here to view the complete filing.

UPDATE: American Airlines spokesman Michael Trevino issued this statement about the judge's written ruling.

"As previously stated, at next week’s AMR Board meeting, Tom Horton will recommend that the Board amend the Plan and Merger Agreement – specifically, to remove his personal compensation. Tom has consistently indicated his strong support for the Plan and the Merger, and he strongly feels that this amendment is the right thing to do – to alleviate the uncertainty and doubt, to support the merger with US Airways, and to complete one of the most successful restructurings in commercial aviation. The compensation agreement was supported by AMR's Board of Directors and the Unsecured Creditors’ Committee, which consulted compensation professionals in its review. The compensation agreement also reflected Tom's continued role as chairman of the Board of the new American Airlines Group during the transition period following the completion of the merger."

-Andrea Ahles

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c2cc953ef019aff5f1d60970b

Listed below are links to weblogs that reference Judge issues written ruling on AMR CEO Horton's severance payment:

Comments

Didee

Begin forwarded message:

From: D.G.
Date: September 16, 2013, 13:29:12 CDT
To: "aahles@star-telegram"
Subject: Golden Parachutes/Bankruptcy regarding AMR/US Air merger

Dear Andrea:

This should also be an open letter to the "Old UALer's" in the Chicago Sun-Times and the Trib. (This article deals with the American Airlines and US Airways merger and bankruptcy t
which would be very interesting to the old UALer's.)

I am reading the Star Telegram for Tarrant County and Texas, as we now live in Fort Worth. To fill in the background my father worked 35 years for United Airlines, my mother worked eight years, I worked 10, and my husband just retired after working 46 1/2 years, all with the "old United" at various departments at LAX. I have lived and breathed United all of my life.
We are watching the Continental- United merger with great interest as it is starting to go down the tubes.

My husband and I remember the last CEO to leave United, after only two years with the company, the company declared bankruptcy and then was handed his "golden parachute". I don't even remember his name as it isn't even worth mentioning, but he got something like 20 million, a lifetime chauffeur driven limo, and a lifetime membership at one of the the most exclusive country clubs in Chicago. He drove United into the ground in two years and we went into the ground, too.

(Why do these CEOs trash their companies and then leave with a golden parachute that they do not deserve?)

I am reading the business section today for 'Tarrant County and Texas' newspaper regarding the AMR and US Air merger and bankruptcy. Finally a judge with a brain. Here is the article by Andrea Ahles. [email protected]:

Judge explains CEO pay rejection

"His ruling says AMR's argument in favor of Tom Horton's severance is "legal fiction."

"US Bankruptcy Judge Sean Lane explained his rationale for rejecting a 19.875 million dollar severance package proposed for AMR chief executive Tom Horton, saying in a written decision Friday that sacrifices made by employees and bankruptcy should be taken into account."

(Gee, what a concept. UAL took the low road.)

"In a 16 page ruling, Lane addressed AMR's argument that Horton's cash and stock payment would be made after the company emerged from bankruptcy as the newly merged American Airlines – US Airways, calling it "legal fiction."

"Lane wrote that while he sees the value of Horton's management of AMR in bankruptcy, he does not agree that a retention payment should be made to keep Horton on the board after the merger."

"At Thursday's court hearing in New York, Lane approved the AMR restructuring plan, assuming that the carrier wins an antitrust trial and is allowed to merge with US Airways."

"Tom has consistently indicated his strong support for the plan and the mergers, and he strongly feels that this amendment is the right thing to do to alleviate the uncertainty and doubt, to support the merger with US Airways and to complete one of the most successful restructurings and commercial aviation, American spokesman Michael Trevino said."

"The restructuring plan is contingent on the outcome of an antitrust lawsuit filed by the Justice Department."

"The government has agreed that the merger is anti-competitive and would lead to higher fares and fees for consumers."

(The government wants to keep airfares low. But, actually, this is a good thing. The flying public doesn't seem to realize that in today's dollars they are paying less for a flight than they did in 1970. The cost of living has risen quite a bit since 1970, but airfares have not kept up with the rising prices of everything else. Daily costs have skyrocketed, such as jet A fuel, et al. Can you buy a brand-new car for $2000? No. Can you buy a house in Southern California for $50,000? No. Every airline should raise their fares.)

"A trial in Federal District Court is scheduled for November 25."

"In his ruling, Lane questioned why Horton should get 4.5 million more than the 15.3 million he would have received from AMR if the company were involved in a merger before it's bankruptcy. Horton was named chief executive of AMR the day before it filed for bankruptcy protection."

"There have been significant sacrifices by the Debtor's employees, most notably union members, that allowed the plan to move forward, the ruling said."

"These sacrifices should be considered in evaluating the reasonableness of this proposed payment, not withstanding the very favorable recoveries provided by the plan to creditors and equity holders."

(An interesting situation going on.)

D. G.

Sent from my iPhone

Post a comment

Comments are moderated, and will not appear on this weblog until the author has approved them.

If you have a TypeKey or TypePad account, please Sign In.