The rich price fetched last week for the Indiana Toll Road means the top five executives of its bankrupt operator should be sharing a $2.45 million bonus pool as a reward for their services.
ITR Concession Company CEO Fernando Redondo and the four executives under him will receive the money when IFM Investors closes on its $5.72 billion offer for the road, under the terms of an order issued in January in U.S. Bankruptcy Court. The closing is expected within months.
The order for the payout was issued by Judge Pamela Hollis after the special committee overseeing the sale submitted a motion to provide incentives for top Toll Road executives helping to market the road.
ITR Concession Company declared bankruptcy on more than $6 billion in debt in September. The $5.72 billion from IFM will be used to pay off creditors.
Under the incentive bonus plan approved by the judge, the five top executives share a $1 million bonus pool if the road's sale fetches more than $4.5 billion. But for every $1 million paid above $5 billion, the bonus pool grows by $2,000. The motion did not specify how the bonus pool is split among the five executives.
If the Toll Road sold for $4.5 billion or less, the four top executives other than the CEO would have shared a bonus pool of just $300,000. The CEO would have received no bonus.
The filing of the incentive plan motion in early January offered the first glimpse of the rich price expected by those conducting the bidding. The price offered by IFM and accepted last week in a definitive purchase and sale agreement is $1.92 billion more than the road fetched just nine years ago when the lease was auctioned off by the state of Indiana.
The deal must still be approved by Indiana Finance Authority, which oversees the lease through its Toll Road Oversight Board.
Lake County and LaPorte County, backed by heavyweights in the financial services and banking industry, had joined forces to submit their own bid for the Toll Road. An Indiana Finance Authority spokeswoman said last week the bid from the two counties had been pre-qualified as "a viable option" but the Toll Road's creditors chose to pick the IFM bid.
Officials in both counties decried the swift approval of the IFM bid and blamed the denial of their own bid on hostility from the Indiana Finance Authority.
The incentive bonus plan for top executives is separate from a plan for retention bonuses for 38 Toll Road managers, supervisors and others also approved by the bankruptcy court. That plan will pay out up to $748,000 in retention bonuses.
Under that plan, no single employee covered will receive more than $95,000 and the average payment will be approximately $19,675.