Residential Capital LLC, the bankrupt mortgage unit of Ally Financial Inc. (ALLY), asked a court to reconsider its proposal to pay bonuses of as much as $7 million to 17 senior executives, saying it has changed the program to overcome the judge’s opposition.
The money would be paid if the company succeeds in selling assets at a pair of auctions scheduled for this month, ResCap said in papers filed yesterday in U.S. Bankruptcy Court in Manhattan.
The bonuses “continue to represent a reasonable amount, especially when compared with the combined stalking-horse bids of approximately $3.9 billion,” ResCap said in the filing. So- called stalking-horse bids are the lead bids in a bankruptcy auction. The company said it has tied the bonus payments more closely to the executives’ performance.
ResCap, based in New York, filed for bankruptcy in May with plans to sell most of its assets and resolve legal claims related to residential mortgage-backed securities.
The changes in the latest proposal were designed to address concerns expressed by U.S. Bankruptcy Judge Martin Glenn when he rejected the first bonus program in August. Glenn said then that the bonuses, designed to keep the executives with the company until the bankruptcy case was finished, weren’t tied closely enough to performance.
ResCap plans to hold an auction for the mortgage servicing business with a unit of Fortress Investment Group LLC (FIG) as the lead bidder. The unit, Nationstar Mortgage Holdings Inc. (NSM), has agreed to buy the servicing business for more than $2.4 billion unless it is outbid.
The company also plans to sell a portfolio of mortgage-loan assets at a separate auction.
The case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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