U.S. Trustee objects to ResCap's proposed bonus plan

Fri Jan 11, 2013 10:40am EST

Jan 11 (Reuters) - A plan by Residential Capital LLC, the bankrupt mortgage lending unit of Ally Financial Inc, to pay up to $33.4 million in annual bonuses to about 3,000 of the company's 3,926 employees drew an objection from a U.S. bankruptcy monitor.

U.S. Trustee Tracy Hope Davis, who represents the Justice Department, said in court papers that the annual incentive plan could not be characterized as being part of ResCap's ordinary course of business since it entered bankruptcy protection with the intention of selling its servicing platform and loans.

The plan includes senior executives other than the company's chief executive, president and chief capital markets officer.

In August, a federal bankruptcy judge rejected the company's plan to pay incentive bonuses to 17 senior executives, saying the payouts were aimed at retaining them, not to compensate for increased responsibilities or performance, as required by bankruptcy law. An amended bonus plan, based on more ambitious performance metrics, was approved in October.

Davis said the decision to pay bonuses to employees who are not covered under the incentive and retention bonus plans could rest with a committee of unsecured creditors to determine whether such payments were justified.

ResCap filed for Chapter 11 bankruptcy protection on May 14 to address mortgage-related liabilities. U.S. taxpayers own about 74 percent of Ally, which was once part of General Motors Corp. Ally did not file for court protection.

The case is In re: Residential Capital LLC, U.S. Bankruptcy Court, Southern District of New York, No. 12-12020.