With the shopping season looming and bankruptcy proceedings underway in federal court, Toys R Us went to its creditors in November with an unorthodox request. To boost holiday sales, the insolvent company asked, let us pay out millions of dollars in bonuses to our top executives.
On Tuesday, a bankruptcy judge approved the proposal.
Under the plan, Toys R Us will pay 17 executives some $14 million in incentive bonuses, as long as the company hits its target of $550 million in earnings. It must hit a minimum of $484 million in adjusted earnings before any bonuses are awarded, as USA Today reported.
Attorneys for the company argued in court papers that the bonuses would help encourage executives to focus on driving up sales as the holidays approach.
But Judy Robbins, a Department of Justice attorney representing the interests of creditors, contended that the bonuses were excessive given the company's financial situation.
"It defies logic and wisdom, not to mention the Bankruptcy Code, that a bankrupt company would now propose further multi-million dollar bonuses for the senior leadership of a company that began the year with employee layoffs and concludes it in the midst of the holiday season in bankruptcy," she wrote.
She added later that some executives already receive other perks, including personal drivers and private planes.
In court, U.S. Bankruptcy Judge Keith Phillips noted that none of the company's creditors or lenders had raised objections - a silence he said he found "particularly striking," according to USA Today.
"On the contrary, I see the committee and any creditors who have addressed this court are asking the court to approve this plan and I think that's telling," he said. He gave the bonus plan the green light after a five-hour hearing in Richmond.
The company's attorney, Joshua Sussberg, assured the judge that the company was "laser-focused on the holidays," according to Reuters. There was still time, he said, to spur shoppers to "buy as much as they can."
Toys R Us, headquartered in Wayne, N.J., has 1,600 stores globally and about 64,000 employees. It filed for Chapter 11 bankruptcy protection in September with plans to restructure $5 billion in long-term debt. It bought out one of its biggest competitors, FAO Schwarz, in 2006.
Sussberg, the company's attorney, said the retailer hopes to ready a business plan by next July, and aimed to be out of bankruptcy by the 2018 holiday season.
(c) 2017, The Washington Post * Derek Hawkins