Stephen Cooper, Enron's interim CEO and chief restructuring officer, said the plan filed with the U.S. Bankruptcy Court in New York was necessary to retain vital employees needed to reorganize the company and maximize its value for creditors.
The plan, which has been approved by the Enron creditors' committee, is designed to retain employees whose skills and experience are critical to the restructuring.
"For Enron to successfully reorganize the viable power and pipeline business and to liquidate certain non-core assets to maximize value for our creditors, we need to ensure that our critical employees are committed to the completion of these tasks," Cooper said. "An incentive program like this retention and severance plan is common in bankruptcy proceedings and provides our employees with some certainty in a very difficult situation, while at the same time providing our creditors with the assurance that we will successfully sell viable, cash-producing assets."
The severance part of the package extends to about 1,700 eligible employees in the debtor companies, mostly in Houston, who are not covered by other plans. Severance pay would be based on years of service, with a maximum of eight weeks base pay and a minimum of $4,500.
The retention components of the plan would retain employees whose skills or knowledge are critical to the company's liquidation of certain assets and reorganization, the company said.
The value of the severance and retention plan would range from $47.4 million to $130 million, depending on asset sales and other cash collections.
"The types of payments contemplated in this plan are typical in bankruptcies," said Bob Medlin, of PriceWaterhouseCoopers Business Recovery Services, who is an expert in bankruptcies and a consultant to Enron. "However, in line with the significant breadth and complexity of the issues facing Enron, the plan covers a greater number of employees. Given the thousands of multi-party contracts to be analyzed, assets to be sold and partnerships to be unwound, this broad retention plan will be essential in helping creditors realize the greatest value."
The plan must be approved by the bankruptcy court. Creditors and other interested parties will have a period of time, set by the court, to comment on the plan.
Enron Corp. delivers energy, physical commodities and other energy services to customers around the world. The retention and severance plan does not cover the roughly 20,000 employees in non-debtor subsidiaries not involved in the bankruptcy filing.
Enron filed for Chapter 11 protection Dec. 2 in the nation's largest bankruptcy and since then has been the focus of multiple investigations by the Securities and Exchange Commission, the Justice Department and Congressional committees.
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