From yesterday's Chicago Tribune:
chicagotribune.com
Barbara Rose
Comdisco may give employees a winning ticket
Published June 13, 2002
It should be easy to tell which employees are winners when Comdisco Inc. emerges from bankruptcy in a matter of weeks.
Winners will get bonuses simply for sticking around.
Losers will get pink slips.
The deal isn't a lottery, though the stakes certainly are worthy of a gambler's attention.
The fallen computer-leasing giant is proposing to dole out as much as $70 million in bonuses in coming months--money that could go to pay off claims--to about 450 employees who agree to stick with the Rosemont-based company to oversee its final wind-down.
Their job will be to sell what's left of a company that took late founder Ken Pontikes three decades to build--and his son, Nicholas, three years to wreck.
Former CEO Nicholas Pontikes led Comdisco into a death spiral in the late 1990s by chasing Internet and broadband riches.
Now, in order to persuade employees to stay with the bankrupt company, Comdisco is proposing paying millions in "upside-sharing" bonuses if the final selloff fetches top dollar for Comdisco's creditors.
To be sure, there's little or no upside left in their Comdisco stock.
Stockholders will get promises of payments due in increments after the bulk of creditors' claims have been paid, according to a plan pending in U.S. Bankruptcy Court in Chicago.
Even under the best-case scenario, they're likely to end up with little or nothing because Comdisco isn't planning to rise from its ample ashes.
The company failed miserably as a turnaround opportunity after filing for Chapter 11 protection in July 2001, but it's performed remarkably well as a bankrupt concern that's conducting a "going-out-of-business" sale.
Unsecured creditors are expected to recover about 90 cents for every dollar's worth of their collective $4 billion in claims--a good recovery in a bad market for distressed high-tech assets.
As for Comdisco's executives, several have profited handsomely.
Chief among them is CEO Norman Blake, the turnaround executive whose hiring in February 2001 briefly raised hopes that Comdisco could be rescued.
Blake didn't come cheap. He renegotiated his pay three times, ratcheting his total package to $9.6 million before Comdisco's creditors objected.
They recently won a negotiated settlement to cap his package at $7.25 million, the bulk of which Blake says will go to charity. Not bad for 18 months.
The sum is more than twice what Nicholas Pontikes earned when the company's stock was flying high.
Blake will retire when the bankruptcy proceeding ends.
Some other winners?
Former President Michael Fazio negotiated a seven-figure compensation package when Blake hired him as chief financial officer in July 2001.
He stayed seven months--leaving in February for undisclosed reasons--but he's still trying to collect a $1.16 million severance payment that his lawyers claim he's owed.
Blake initially OKd the payment, but when Fazio missed a deadline for signing his separation agreement, positions apparently hardened, according to court documents.
Ronald Mishler, the exec who will replace Blake, is going to have to work hard for his bonus. Under the proposed incentive plan, he's eligible for a $3 million payout if Comdisco sells its remaining businesses for more than $2 billion--well above the company's targeted $1.5 billion to $1.7 billion.
Even rank-and-file employees are due for bonuses equal to 50 percent of their salaries, to be paid in twice-annual installments.
Experts say such programs are common in bankruptcies--and for good reason.
"This isn't Joe's Bar & Grill," says Peter Chapman, a bankruptcy newsletter publisher in New Jersey who follows Comdisco's case.
"It's a very complicated wind-down. If key employees jump ship, you've got nothing left to recover."
Still, payouts are not going to be easy for shareholders to accept while their own recovery is uncertain.
There will be more fireworks in court before the plan is approved. Too bad none of them will revive Comdisco.
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Contact berose@tribune.com |
