Revlon’s employee bonus plan draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., Aug. 26 – Revlon, Inc.’s motion seeking court approval of an up to $36.02 million key employee incentive program drew an objection from Region 2 U.S. trustee William K. Harrington, according to court documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

The KEIP motion seeks to provide to eight senior executives total threshold, target and maximum opportunities of roughly $14.49 million, $28.97 million and $36.02 million, respectively, over its 18-month duration.

Revlon acknowledges that the cost of the proposed KEIP is at the upper end of awards allowed in bankruptcy cases.

“The KEIP motion states that threshold metrics are based upon the debtors’ business plan and/or the DIP business plan, neither of which has been made public,” the U.S. trustee said.

“Even if the plans were publicly available, the KEIP motion fails to establish that the KEIP performance metrics are rigorous and incentivizing because of the absence of historical data regarding the various performance metrics.”

Revlon also said it requires bonus payments for its senior executives in light of the anticipated departures of two of the executives and the active recruitment and employment solicitations of the remaining senior executives.

Harrington said the departure from the historical practice of awarding bonuses on an annual basis to paying awards on a quarterly basis with a clawback if employment is terminated upon the earlier of confirmation of a plan or Dec. 31, 2023 emphasizes the retentive nature of the KEIP.

The U.S. trustee said that given the retentive characteristics of the KEIP, bankruptcy code requires that the KEIP recipients must have a bona fide job offer in order to be permissible.

“While the KEIP motion advises that two of the senior executives have provided notice of their departure, no evidence of job offers have been disclosed,” Harrington said.

A hearing is scheduled for Sept. 1.

The hair color products and cosmetics company is based in New York. The company filed bankruptcy on June 15 under Chapter 11 case number 22-10760.

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