Citadel To Pay Bonuses In Options, Not Stock
November 2, 2010 at 5:41 PM (PT)
CITADEL BROADCASTING has agreed to rescind $110 million in stock bonuses to management and directors after a battle with hedge fund R2 INVESTMENTS, LDC. The NEW YORK TIMES reports that CITADEL will now issue stock options to its top management rather than shares. CEO FARID SULEMAN was scheduled to get over $55 million of the $110 million of bonuses in stock.
R2 had filed a reply last FRIDAY with U.S. Bankruptcy Court in support of its objection to the stock bonuses granted to over 180 CITADEL BROADCASTING employees after its reorganization, asking the court, "If CITADEL is right that what they did cannot be challenged in this Court, then why is there even a confirmation process? If CITADEL is right that boards of reorganized debtors are free to act without regard to protections negotiated with creditors during the plan process, then why should creditors negotiate anything other than the nomination of the directors?"
The filing, a response to CITADEL's opposition to R2's motion challenging the bonuses, called CITADEL's bonus grants "brazen" and notes, "The very first equity compensation awards granted by the board post-emergence -- only weeks after emerging from bankruptcy – completely ignored the material limitations creditors negotiated with the insiders who would manage the debtor after emergence. Why did those negotiations occur if they simply could be ignored immediately after emergence?"
"The Court," R2 asserted, "must now decide whether the negotiations that creditors engage in and that become part of a confirmed plan of reorganization have any meaning. Either they do, in which case the Court must order CITADEL to comply with the Plan, or they do not, in which case parties should stop wasting their time negotiating, and the Court should not waste its time hearing evidence regarding terms such as post-emergence compensation."