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How Sears and Toys ‘R’ Us Illustrate the True Winners and Losers in Corporate Bankruptcies

Late last week, Sears filed a motion in bankruptcy court seeking approval to pay up to $25 million in executive bonuses during Chapter 11 proceedings.
The request was certain to anger many, coming just weeks after the beleaguered retailer announced nearly 200 additional store closings, representing thousands of employee layoffs and adding to a list of hundreds of locations that it has shuttered in recent years.
Even so, it wasn’t unusual. “Typically companies that enter into Chapter 11 will ask for bonuses to retain and incentivize executives to stay with the company,” said Corali Lopez-Castro, a bankruptcy attorney and managing partner at Kozyak Tropin and Throckmorton.
In the filing, Sears’ lawyers argue that the senior management and employees who would benefit from the bonuses “are critical to [the company’s] ability to maximize stakeholder value through this restructuring process” and that without incentives, they could jump ship, taking with them “institutional knowledge” and “longstanding relationships… that would be difficult and expensive, if not impossible, to replace.”
The bonuses would be contingent on meeting cash flow goals, and would max out at nearly $250,000 on a quarterly basis for a handful of top executives with base salaries of around $1 million per year.
A larger group of

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Via:: https://footwearnews.com/2018/business/retail/sears-toys-r-us-bankruptcy-employee-severance-1202708495/