Neiman Marcus is asking a Texas federal bankruptcy court to allow nearly $ 10 million in salary increases for CEO Geoffroy van Raemdonck and seven other executives as the company restructures debt.
The proposed compensation plan covers personnel who are “essential to the day-to-day operations” and the financial success of Neiman Marcus during the bankruptcy process, according to a court filing.
Neiman Marcusin May after the coronavirus closed its stores. The Dallas-based clothing and department store, famous for its outsized vacation catalog offerings, was already gearing up for a judicial reorganization of its $ 5 billion debt.
As part of the bankruptcy filing, Neiman Marcus said it secured $ 675 million in financing from a majority of creditors to continue operating during the restructuring. These creditors now hold more than two-thirds of the company’s debt.
The company said it was evaluating locations, but did not say whether it would close any stores.
Neiman Marcus’ salary increase plan runs counter to the typical schedule followed by large corporations in bankruptcy plans. Usually, a company grants executive retention bonuses and then files a restructuring request. , Hertz and are three recent examples of this tradition. In fact, a third of more than 40 large companies gave bonuses to executives before they filed for bankruptcy this year, Reuters reported.
Neiman Marcus must ask a judge to approve his plan because the ruling violates a 2005 bankruptcy reform law to reign which prohibits companies from paying bonuses to executives in the event of bankruptcy. The compensation plan now goes to Judge David Jones in the South Texas District of Houston.
Neiman Marcus employs around 13,200 people, including 9,545 full-time and 3,655 part-time, according to court documents.
In addition to eight appointed executives, Neiman Marcus’ compensation plan covers 17 senior vice presidents, 82 vice presidents, 40 directors and up to 100 additional key employees identified by the CEO as eligible. The group has seen “a substantial increase in their workloads without any concomitant increase in their compensation,” the company said in the filing.
The file says van Raemdonck gave up his April salary and has suffered a 25% cut since May. Other senior executives also saw their salaries cut by 25% from April.
The company said it was facing “severe business pressures due to recent challenges in the retail market and in particular the unprecedented and unforeseen disruption to debtors’ businesses caused by COVID-19.”
“In light of these pressures and the additional challenges of the Chapter 11 filing, it is critical that debtors implement the KEIP (Compensation Plan) immediately to ensure that key employees stay with debtors,” said the Debtor. deposit.
The jobs require more intense negotiations with customers, suppliers and employees to convey a “business as usual” message necessary for its restructuring, the company said. The COVID-19 pandemic has “further aggravated” their jobs and made it more difficult for a bankrupt business to operate.
Retaining people already familiar with the company’s operations will help preserve it and benefit all stakeholders in bankruptcy, according to the filing.
Current staff cannot be easily replaced “without negatively affecting operations and bankruptcy,” the file said, adding that hiring and training replacement would be “difficult and expensive.”