LTV bankruptcy

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

BANKRUPT LTV STEEL TO PAY $ 14 MILLION DOLLARS IN
EXECUTIVE BONUSES

  from the CLEVELAND PLAIN DEALER :




   LTV proposes bonus plan

  Saturday, March 17, 2001

  By CHRIS SEPER and SANDRA LIVINGSTON



  PLAIN DEALER REPORTERS




  YOUNGSTOWN - LTV Corp. wants to pay its key employees and its chief
  consultant more than $14 million to steer the company through Chapter 11
  bankruptcy, according to court filings.

  On Tuesday, U.S. District Judge William T. Bodoh is to consider motions
that
  include: Retention bonuses of $1 million to LTV Corp. Chairman and Chief
  Executive William H. Bricker and $1.5 million to Chief Operating Officer
  John D. Turner. Also, Turner's salary would increase from $500,000 a year
to
  $600,000. Additional retention bonuses totaling $8.7 million to 109 key
  employees. A payment plan for turnaround consultant Jay Alix & Associates
  that includes hourly pay rates from $200 to $620 and a bonus of at least
  $2.5 million. The bonus could increase to $3.5 million if LTV emerges from
  bankruptcy court protection in 18 months or if it transfers most of its
  integrated steel business to another company.

  LTV's court filing said the bonuses are critically needed to retain
  experienced executives and stanch the company's increasing turnover rate.
  LTV spokesman Mark Tomasch said that Bricker's bonus is competitive and
that
  his $700,000 salary is appropriate.

  Tomasch also said the Jay Alix firm is needed to help LTV contend with
  fundamental problems that threaten its viability and jobs. The two
  conditions that could produce the bigger bonus, he said - a successful
  restructuring or keeping units alive by selling them - are what the
company
  considers successful outcomes, as opposed to shutting down operations.

  Jay Alix, based in Southfield, Mich., has been working for more than two
  months on a restructuring of LTV's integrated steel operations.

  "For the many people who depend on the company for their economic
  well-being, it is necessary that we engage the best help we can get to
save
  the company," Tomasch said.

  But LTV's proposals will face opposition in court. An objection filed by
  Chase Manhattan Bank, one of LTV's major lenders, said requirements for
Jay
  Alix to get the multimillion-dollar bonus are so low that getting it is
  almost certain.

  "When this is factored on top of a robust hourly fee, Alix's compensation
  may well be excessive," the objection says.


  Donald M. Robiner, the U.S. trustee who supervises all bankruptcy cases in
  Ohio and Michigan, has filed an objection to even hiring Jay Alix.

  Robiner said the firm isn't a truly independent consultant because one of
  its principals, James Bonsall, is acting as an officer of LTV. He carries
  the title of chief restructuring officer.

  His office also objected because Jay Alix asked to be indemnified - that
LTV
  cover the costs of liability for any wrongdoing Alix may commit, whether
  intentionally or not.

  "We think as highly competent professionals - they are asking for an
  exceedingly generous rate of compensation - they ought to bear the risk of
  any wrongdoing they may commit," Robiner said. "We think it's their
  responsibility and not that of the debtor. We think the debtor's assets
  ought to be preserved for maintaining the business and paying creditors."

  As for Jay Alix's compensation, he said: "We think those kind of financial
  arrangements are overly generous." He also believes that the bonus should
  not be determined up front.

  Jay Alix spokeswoman Debra Kuptz said that there is nothing out of the
  ordinary about Bonsall's relationship with LTV and that she hopes the
  trustee and judge will not object once they learn more about it.

  "We have used the model many times, as have many professional firms," she
  said. Kuptz also said that the indemnification language "is standard and
  customary" and that the compensation package is "very normal."

  Similarly, Tomasch said the retention plan for Bricker and other key
  employees is standard for a bankruptcy case. LTV's court filings say the
  retention fee for Bricker was needed because his current $700,000 base pay
  and benefits are "inadequate to compensate him for the substantial
  contribution he is making" in handling LTV's current woes.

  Saul Eisen, a longtime bankruptcy lawyer and trustee in Cleveland, said
  Bricker's pay is probably standard. "It's not exorbitant for a man of his
  talents. It's just peculiar to me that he gets a [guaranteed] bonus.

  "If he brings them out successfully, I would do a bonus. If he doesn't
bring
  them out successfully, I wouldn't give him anything," Eisen said. "Failure
  should not be rewarded unless it's beyond everybody's control."

  Eisen represents the Cleveland school board, which has an interest in the
  LTV bankruptcy case because it wants to protect its tax base.

  The United Steelworkers of America did not file objections to either the
  retention plan or Jay Alix's compensation. David Jury, assistant general
  counsel for the union, said both proposals are broadly in line with what
the
  union has seen in similar cases.

  "The company has assessed what it believes is the appropriate course of
  action in its retention of key employees and retention of outside
  professionals," Jury said. "Our goal as a union is to work with these
  managers and to work with these professionals with the aim of preserving
  jobs and benefits for active employees and retirees."

  Robiner, the trustee, said he realizes that some mill workers could be
  concerned about the costs of the retention bonuses. But he said the
priority
  should be to focus on all the expenses.

  "The professional compensation for Jay Alix and everybody else involved is
a
  much greater amount in totality than the amounts in the retention
benefits,"
  he said. "The purpose of the bankruptcy court and the whole system is to
put
  some control or some review on these expenditures."

  Plain Dealer reporter Peter Krouse contributed to this article.

  E-mail: cseper@xxxxxxxxxx

  Phone: 216-999-5405

  E-mail: slivings@xxxxxxxxxx

  Phone: 216-999-4453


  ©2001 THE PLAIN DEALER.