Armstrong Flooring Paid Executives a $4.8 Million Bonus Before Bankruptcy
Armstrong Flooring Inc. paid its top executives $4.8 million just before filing bankruptcy, a move that was questioned by lenders, Bloomberg News reported. Company Chief Executive Officer Michel S. Vermette and at least four other managers got part of their annual incentive payments early in order to try to keep them on the job, according to court papers and regulatory filings. Such payments have come under fire from Congress, creditors and employees, who say the companies are evading bonus restrictions that judges can impose once in bankruptcy. A federal report found that in one recent year, 42 companies paid out $165 million just before filing bankruptcy. Initially, the bonuses threatened to disrupt the company’s plan to borrow $30 million to fund its reorganization. Armstrong lender Pathlight Capital had opposed the new loan arguing it was inappropriate, in part because the money would be used to “essentially replenish” cash the company paid the executives. On Monday, Pathlight dropped its objections to the proposed reorganization funding when Armstrong agreed to change the financing package, Armstrong attorney Ron E. Meisler said during a court hearing held by video. Under the new financing agreement, Armstrong will borrow $24 million, half of which will be a term loan that will include Pathlight as administrative agent, according to court documents.
