Back in January, milk producer Borden Dairy Co. (of Elsie the Cow fame) filed a Chapter 11 in Delaware citing the rising cost of raw milk and market challenges facing the dairy industry including a $1.1 billion decline in traditional milk sales in 2018. Borden had about 3300 employees as of the Petition Date. In May, Borden sought Bankruptcy Court approval of 2 proposed bonus/retention plans under Section 503 of the Bankruptcy Code – a $2 Million “key employee incentive plan” (KEIP) for 8 insiders and a $2.3 Million “key employee retention plan” (KERP) for 44 purportedly key employees.
The Creditor’s Committee, pre-petition lender, PNC Bank, and the Teamsters objected to both plans but the US Trustee only objected to the KEIP plan related to the insiders. After chiding stakeholders for failing to reach agreement on adjustments to performance targets proposed by Borden in the wake of COVID-19 that the Court believed all but guaranteed that the subject employees would meet the benchmarks, and raising other evidentiary concerns, in early June, according to recent Law360 article, Bankruptcy Judge Christopher S. Sontchi, ultimately approved slightly tweaked plans, which are becoming increasingly common in large Chapter 11 cases and causing great consternation amongst creditors. On Friday, June 26th, Judge Sontchi approved the $300+ Million sale of Borden.
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If you have questions about options available to your business during this time, please contact one of Bast Amron’s Insolvency Litigators.