Hertz employee bonus plans for 2021 draw objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., Feb. 9 – Hertz Corp.’s motion for approval of a key employee incentive plan and an employee incentive plan for 2021 drew an objection Monday from Regions 3 and 9 U.S. trustee Andrew R. Vara, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

The debtors seek approval of a $12.1 million incentive plan that is based in large part on debtors’ projected financial performance for calendar year 2021.

Vara said the debtors need to prove the 2021 incentive plan financial goals are truly a reach.

“Merely claiming they are an increase over 2021 projections, and that the 2021 projections are based on undisclosed 2020 year-end projections, is insufficient,” Vara said.

“The fact that the plan’s goals exceed past performance does not demonstrate that the metrics are incentivizing as required by the Bankruptcy Code.”

The KEIP covers eight senior officers, including the debtors’ chief executive officer, chief financial officer and various executive vice presidents.

In addition, the debtors seek approval of an EIP that includes 18 senior vice presidents and 24 vice presidents.

The 2021 KEIP and EIP are structured around three financial metrics that account for 70% of the proposed bonus plan: adjusted EBITDA (30%), revenue (10%) and fleet utilization (30%).

The remaining 30% is based on meeting three restructuring goals: filing a Chapter 11 plan by March 1 (5%), disclosure statement approval by May 1 (10%) and a plan going effective or a sale of substantially all of the debtors’ assets closing by Aug. 1 (15%).

The financial and restructuring goals are the same for the 2021 KEIP and the 2021 EIP.

The debtors set an “individual award base” for each of the 2021 plan participants based on the individual’s “target pre-restructuring annual cash incentive opportunities.”

Vara said the debtors do not identify the “pre-restructuring time period,” nor do they indicate if the participants received raises in 2021.

Hertz is an Estero, Fla.-based car rental company. It filed Chapter 11 bankruptcy on May 22, 2020. The Chapter 11 case number is 20-11218.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.