The top executive of the bankruptcy-seeking parent company of the New Haven Register has left the building — buoyed by a secretive departing bonus.
The clues to that payout appear buried deep amid the hundreds of pages the Journal Register Co. filed in federal bankruptcy court last Saturday. The Yardley, Pennsylvania-based chain, struggling with a debt estimated at between $500 million and $1 billion, is seeking protection from creditors under Chapter 11 of the bankruptcy code. The company owns the New Haven Register and 19 other daily newspapers and some 180 weeklies.
The company revealed in a bankruptcy court filing that James W. Hall (pictured) is no longer the company’s top executive. He has been replaced by Robert Conway, whose title is “chief restructuring officer.” That arrangement was described in this Feb. 23 filing and this “transition memo,” which also details arrangements with major lenders.
Meanwhile, before skipping out, CEO James Hall worked out a potentially lucrative departing bonus with the company’s major lender. He started cashing out before he filed the company’s bankruptcy papers — and secured a promise from lenders not to go after him later for the money.
The revelation follows the disclosure that the company seeks to pay other top execs $1.7 million in bonuses — some called “shutdown bonuses” — in return for continuing to lay off workers and close newspapers. Connecticut Attorney General Richard Blumenthal said he plans to file an objection to those bonuses as the bankruptcy case unfolds.
Assistant Attorney General Denise Mondell started that process Wednesday by entering an appearance in the case.
The next court hearing on the company’s bankruptcy petition is scheduled for March 17.
Last-Minute Maneuver
The details of CEO Hall’s parachute remain incomplete, pieced together from statements scattered through different court filings. The company’s disclosure of the arrangement gives new meaning to the term “burying the lede.”
The fact that Hall entered into a “transition and separation agreement” with lenders on Jan. 20 — a month before the bankruptcy filing — is mentioned in a single paragraph on page 10 of a disclosure statement appearing on this page of a Journal Register company website. (Warning: readers with Macintosh computers may have trouble downloading the document. It’s in a folder entitled “Disclosure Statement and Plan of Reorganization”).
Here’s what the paragraph, titled “Separation Agreement With James Hall,” reads:
“The Consenting Lenders and the Existing Agent shall not, as long as the Plan Support Agreement is in effect, initiate, participate or cooperate in any manner in any proceeding to avoid or seek disgorgement of, under chapter 5 of the Bankruptcy Code or otherwise, the ‘Settlement Payment’ and the other payments provided for in that certain Transition and Separation Agreement between JRC and James Hall, dated as of January 20, 2009.”
That means that lenders agreed not to try to convince the judge to order Hall to return money he has already paid himself under his parachute deal, according to a New Haven-based bankruptcy expert who reviewed company filings and translated that paragraph for the Independent. The key word is “disgorgement.” That means trying to get the money back.
What are the details of that parachute agreement? Those can be found under the referenced “Transition and Separation Agreement” that was struck on Jan. 20. At this point, Journal Register has chosen not to make that document public. It will have to at some point. For now, the public and shareholders don’t know.
Company officials in New Haven and Pennsylvania has declined to return repeated requests for comment on the bankruptcy.
A clue to the possible scope of the parachute can be found in separate documents Journal Register filed with the federal Securities and Exchange Commission.
The first is this “Change of Control Employment Agreement” dated Nov. 30, 2007. (Hall, who’s 61 according to the company website, took over chairman and CEO that same month.)
Section 5 (pages 7 – 8) details then-current terms of payouts to Hall if he leaves the company. The payout is comprised of a complicated formula adding his average salary to his average bonus over previous years. If he had left the company in 2008, that combined figure would be $600,000, according to the agreement. Hall would continue to receive benefits for two more years.
Those number might be larger now, because his salary and bonuses were raised, according to this SEC-filed employment agreement, also dated Nov. 30, 2007. It set Hall’s base annual salary as $675,000 plus bonuses of potentially double that amount.
Is the actual parachute he grabbed last month based on those numbers, or different ones? That’s one of many secrets awaiting the light of public disclosure as the crumbling of a slash-and-burn corporate newspaper chain proceeds in a New York courtroom.