Court allows bankrupt Philly refiner to award secret bonuses
The bonus awards will be kept under seal, and a small circle of parties are bound by court order to keep the information confidential.
U.S. Bankruptcy Court Judge Kevin Gross will allow Philadelphia Energy Solutions to award secret bonuses to unidentified managers.
The judge, sitting in Wilmington, on Wednesday approved a request by the refiner to award an undisclosed number of bonuses to executives. The bonus awards will be kept under seal, and a small circle of parties is bound by court order to keep the information confidential.
The refinery, whose bankruptcy is filed under the corporate name PES Holdings LLC, previously paid $4.6 million in bonuses to executives following a devastating June fire that led to its closure and bankruptcy. It filed a request Sept. 27 to award additional bonuses, though it asked to keep details confidential to reduce the “negative impact on employee morale” and also the chance that competitors could use the information to recruit PES executives.
The bonuses, which are sometimes awarded by companies undergoing bankruptcy reorganization to retain key employees who might otherwise be tempted to depart, raised protests among some parties that are getting the short end of the refinery’s closure.
The committee of unsecured creditors objected, saying there was “no legitimate basis” for shielding all the information from the public. But it withdrew the objection a day later.
The United Steelworkers Union, which is a member of the unsecured creditors committee, filed a separate objection that argued that it was impossible to assess the necessity of the bonuses without having access to details. The union represented more than 600 of the refinery’s 1,100 workers, and said the company awarded union workers a $2.8 million “transition fund” for its laid-off employees without disclosing the earlier round of bonuses.
The bonuses “have understandably produced considerable employee and community uproar,” the steelworkers said, citing media reports.
The judge said the refinery had established “just cause” for its request and granted the order. A hearing scheduled for Friday was canceled.
The order was granted on the same day that the U.S. Chemical Safety and Hazard Investigation Board issued a preliminary report attributing the June 21 fire and explosions to a leak caused by the rupture of a corroded steel pipe. The accident caused the release of more than 5,000 pounds of a deadly chemical and launched pieces of shrapnel as large as a truck hurtling across the complex.
The awarding of retention bonuses is a sideshow to the larger decision facing the court over the best path forward for the PES complex, the largest refinery on the East Coast.
PES is shopping the 1,300-acre refinery to potential buyers, but reserves the right to reject a sale and transfer the company’s ownership to the creditors if it receives no suitable offers.
Two potential bidders that have publicly declared an interest in the property include a group led by former chief executive officer Philip Rinaldi, which has proposed restarting the refinery and adding renewable natural gas production, and S.G. Preston, a Philadelphia biofuels marketer that wants to convert the refinery into a producer of renewable diesel and jet fuel.
Several other energy logistics companies have proposed turning the site into a fuel terminal, but it’s unclear whether those plans include fuel production. Some real estate developers have also expressed interest in building warehouse or distribution centers that would tie into the site’s proximity to sea, rail, highway, and airport access.