Gottschalks seeks OK to give execs bonuses
| Wednesday, Feb 25 2009 08:33 PM
Last Updated Friday, Mar 27 2009 12:58 PM
GOTTSCHALKS INC. TIMELINE
1904:launches in Fresno, founded by German immigrant Emil Gottschalk
1987:buys Bakersfield’s popular Brock’s Department Store
1986:trades on the New York Stock Exchange
1998:buys Harris Department Stores’ nine Southern California locations, including Bakersfield’s
2000:buys more than 30 of bankrupt Seattle-based Lamonts stores, expanding Pacific Northwest presence
May 2008:Bakersfield’s two locations in East Hills Mall consolidate, leaving empty the former Harris building
October 2008:delisted from New York Stock Exchange after value falls below $25 million
November 2008:announces $30 million deal with Chinese investor, Everbright
Dec. 4, 2008:reports a $13.6 million loss for first nine months of its fiscal year; days later, the full report says a cash infusion is needed before the end of January
Dec. 18:Everbright scraps deal; the next day, Gottschalks says talks with Everbright and another suitor are ongoing
Jan. 8:December sales results show a 9.6 percent drop from previous year
Jan. 9:Women’s Wear Daily says a $50 million deal is brewing with Everbright and another investor; Fresno’s Business Journal says employees are told to cash paychecks before imminent bankruptcy
Jan. 14:Gottschalks files for Chapter 11 bankruptcy.
Sources: Gottschalks Web site, Californian archives
What’s next for ....
Customers:The company is seeking the bankruptcy judge’s OK to honor programs such as the Plus Program for seniors, the KidZone Program, Gottschalks Treasure Rewards and a credit card that gives customers points and other incentives. The store also wants to continue accepting returns for refunds or store credit and wants to keep selling gift cards.
Employees:An emergency motion to authorize payment of payroll, benefits and related taxes and prevent banks from placing a hold on or reversing automatic deposits will be considered at today’s initial hearing in Delaware.
The company wants the court’s approval to honor vacation, personal, sick leave, bereavement leave and other paid time off.
Gottschalks employs 2,817 full- and 2,465 part-time employees, for a total of 5,282 workers.
East Hills Mall:Gottschalks and Mervyns own their buildings so the mall can’t lease the sites, officials say. They are pursuing tenants for other sites and say overall sales are fine.
Valley Plaza:Parent company General Growth Properties is itself considered likely to file for bankruptcy protection. Mall owners says it’s too soon to tell what impact the Gottschalks filing will have.
Unsecured creditors:Among the top 20 owed money are The Harris Co., Liz Claiborne, The CIT Group/Commercial Services and Finlay Fine Jewelry.
Gottschalks listed $288 million in assets and $197 million in debt.
Shares:As is typical when a publicly owned company files for bankruptcy, trading of shares was expected to be temporarily halted.
Gottschalks, which trades over-the-counter under the symbol GOTT.PK, closed down 3 cents at 15 cents per share Wednesday.
Buyers:Analysts are pessimistic about a purchase of the entire chain. Several larger retailers might pick off assets here and there, they said.
Images
Shoppers come and go at Gottschalks in Valley Plaza on a January afternoon.
Scott R. McGlasson doesn't have any complaints about Gottschalks. He was at the East Hills mall to pay his Gottschalks bill in January.
Related Stories:
- Gottschalks consolidates at East Hills Mall
- Making East Hills alive again
- Demolition of old Robinsons-May site makes way for Target
- Gottschalks kicked off New York Stock Exchange
- Gottschalks: deal scrubbed but talks go on
- Will post-holiday sales make a difference?
- Conflicting reports on potential Gottschalks rescue, or bankruptcy
- Californian exclusive: Construction of new Target shut down
- Analysis: Could Gottschalks go back to Harris?
A federal trustee has objected to Gottschalks Inc.’s request for permission to pay bonuses to top executives even as it struggles to emerge from bankruptcy protection.
The Fresno-based department store chain filed for Chapter 11 bankruptcy protection in January, and most industry watchers expect it will go out of business unless it finds a buyer.
The company filed a motion Feb. 10 asking the U.S. Bankruptcy Court for the District of Delaware for a bonus pool of up to half a million dollars for Gottschalks President and CEO James Famalette and Greg Ambro, the company’s executive vice president and chief operating officer. It asked for another $500,000 to keep other top employees from leaving.
If the court approves the plan, Famalette and Ambro would receive bonuses equal to half of their yearly pay if Gottschalks is sold by Oct. 30, or 31.25 percent of their salaries if the company is liquidated.
Famalette’s annual salary is $560,000, and Ambro earns $395,000 a year, according to court documents.
On Monday, Roberta DeAngelis, acting United States trustee for Region 3, formally objected to the motion, saying in court filings that the bonuses would not add value to the estate and the so-called Senior Executive Incentive Program contained “no meaningful incentives.”
Bakersfield attorney Roger Parkinson, who is not involved in the case, said there is precedent for paying bonuses to leaders of bankrupt companies.
“It seems like the least probable time, doesn’t it?” he said. “The other problem is, what’s left of the engine needs people running it.”
Congress tried to curb abuse, however, by passing the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005.
Among other things, the law limited retention bonuses, severance pay and certain other payments by bankrupt companies.
Gottschalks did not respond to an interview request.
A court hearing on the bonus proposal is scheduled for Monday.
