Four institutional investors today filed a motion in U.S. Bankruptcy Court in New York to block debtors representing auto-parts maker Delphi Corp. from implementing a "key employee compensation program" as part of its Chapter 11 bankruptcy protection proceedings.
The four are the $36 million Raiffeisen Kapitalanlage-Gesellschaft fund, Vienna; the $73 billion Stichting Pensioenfunds ABP, Heerlen, Netherlands; the $17.5 billion Public Employees Retirement System of Mississippi, Jackson; and the $7.3 billion Teachers Retirement System of Oklahoma, Oklahoma City.
The compensation program, which was included as part of Delphi's Oct. 8 bankruptcy filing, would give top Delphi executives cash bonuses of 30% to 250% of their salaries as incentives to stay with company after it emerges from bankruptcy, according to court papers. Attorneys representing the four pension funds argue the company's top executives should be denied such compensation "because it seeks to reward executives who knowingly participated in the fraud" that led to the company being forced to file for Chapter 11 bankruptcy on Oct. 8.
Delphi filed for bankruptcy after it had lost more than $4.5 billion on its balance sheet in 2004 and some $750 million in the first half of 2005. In addition to having a $1.75 billion in revolving credit facilities and $250 million in term loans, it was estimated that the company's $7 billion defined benefit pension plan faced a 36% funding gap.
Calls to Charles Matentette, the company's director of investor relations, were not returned.