A trustee in the AMR Corp. case is objecting to Tom Horton's nearly $20 million payout to step aside as CEO, according to documents filed the U.S. Bankruptcy Court for the Southern District of New York.
U.S. Trustee Tracy Hope Davis filed the objection just before the deadline Friday questioning why it was necessary to pay Horton such as large severance package to leave the company.
As part of the proposed merger with US Airways, Horton will get a payout of $9,937,500 in cash and $9,937,500 in stock.
Horton will then serve as chairman of the company for a year before then giving that position up to US Airways CEO Parker, as well.
Davis objected on grounds that bankruptcy law prohibits large payouts to retain employees during bankruptcy or severance payouts that are "not greater than 10 times the mean severance pay given to non-management employees..."
American Airlines countered that the objections don't have merit because the payments will be made by the new merged company, American Airlines Group Inc.
"The employee arrangements included in the merger agreement are structured to reasonably and appropriately compensate our employees as well as to align them with their counterparts at US Airways with the goal of moving toward market levels over the next few years," American Airlines spokesman Andrew Backover said in a press release. "The employee arrangements were deemed reasonable and appropriate by compensation consultants retained by the Unsecured Creditors' Committee and are in line with industry precedents and the relief requested in the motion is supported by the Unsecured Creditors' Committee and the Ad Hoc Committee of Bondholders."
AMR filed for bankruptcy protection in 2011 and hopes to emerge by the end of September. The proposed merger with US Airways, if approved, would close at about the same time.
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