GT Advanced Technologies, which filed for Chapter 11 bankruptcy in October, has now sought court approval to pay millions of dollars in bonuses to its senior executives. The move is expected to face opposition from multiple lenders it owes money to. Surprisingly, the company declined to reveal the identities of executives set to receive bonuses so as to protect its business from being damaged.
Bonuses necessary to retain key employees
The New Hampshire-based company announced in 2013 that it would transform itself from a sapphire furnace and solar power equipment maker to a smartphone display producer for Apple. But the company failed to make high-quality sapphire screen material acceptable to Apple, leading to collapse of the agreement. GT Advanced had also borrowed $439 million from Apple.
The company said in court filings that the bonuses were necessary to help motivate and retain the “key” employees. GTAT’s lawyers said that the company’s stock was no longer good for motivating employees. Its stock has tumbled more than 96% since Oct.3. Over 800 employees lost their jobs when it shut down its sapphire production plant in Arizona. Employees morale has hit the bottom, and employees are leaving, the company said in a filing with the U.S. Bankruptcy Court in New Hampshire.
GT Advanced proposes three incentive programs
GT Advanced has reached a settlement with Apple. Under the plan, it will be selling its 2,000-odd sapphire furnaces to pay off its debt to Apple, and finance its revival. GTAT has proposed three programs to pay approximately $6 million in bonuses and incentives to employees. The first program, called Key Employee Incentive Plan (KEIP), covers nine unnamed senior executives. It will cost the company as much as $2.275 million.
A second bonus proposal called Key Employee Retention Plan (KERP) would benefit 28 non-senior executives. This program is estimated to pay out $1.4 million. Under this program, executives will receive potential retention bonuses of between $11,000 and $125,000. GT Advanced has also asked permission for a $2 million Management Incentive Plan (MIP) for another 173 employees. The bonuses and incentives would be paid out in the first quarter of 2016.