Consideration of Sun-Times bonus plan on hold

WILMINGTON, Del. -- The Sun-Times Media Group asked a bankruptcy judge Wednesday to delay consideration of proposed bonuses of up to $1.8 million for certain employees if the company completes a successful sale.

The decision came after Judge Christopher Sontchi refused to seal the courtroom during testimony about the bonus plan and to keep certain information secret. The matter is to be revisited at a previously scheduled hearing in July.

"We're going to have to absorb the judge's decision and decide what to do next," said David Agay, an attorney representing the company, which owns the Chicago Sun-Times.

Agay said he may ask Sontchi to reconsider his ruling. The company also could proceed with its request to approve the bonus plan with certain information made public, or withdraw its motion.

In asking the court to approve the plan, the Sun-Times sought to keep the names of the 20 employees who would be eligible for the bonuses secret. It also sought to keep the sale amounts that would trigger different levels of bonus payments, and information about the payments themselves, under seal.

Sontchi ruled that the names of the employees and the individual payments they might receive could be kept under seal, but that information regarding the sales milestones and bonus triggers could be disclosed.

"I really don't view what the company thinks it could be sold for as confidential commercial information," said the judge, who also was not persuaded that disclosing information about the sale milestones and bonus triggers would be "sufficiently damaging" to overcome the public interest of having open judicial proceedings.

"There are parties who have a right to know what's going on in the case who would be unable to do that if I were to grant this order," he said.

Sontchi nevertheless said he would consider the motion to seal the documents as pending, meaning details of the plan will not immediately be available.

Attorneys for the U.S. trustee and the Internal Revenue Service, which is the Sun-Times largest creditor, objected to the bonus plan, saying the company had not provided enough specifics or justified bonuses that could amount to 40 percent of base salary. Trustee attorney Joseph McMahon Jr., who also objected to keeping certain details under seal, described the bonuses as a disguised retention plan that would reward insiders for remaining through a sale.

Susan Kaufman, an attorney representing the Chicago Newspaper Guild, a union for Sun-Times workers, also objected to the sealing.

"We believe that the public should be able to evaluate this plan," she said. "By sealing it, it's certainly not helping morale of the work force."

Agay argued that revealing the names of employees eligible for the bonuses would have a divisive effect on the company, where employees who have not been laid off are being asked to do more work while also supporting a possible sale.

"Morale at the company already is in a challenging place," he said, adding that the courtroom should be sealed while Sun-Times vice president and general counsel James McDonough testified about the bonus plan.

"Am I the only one seeing the irony in the Chicago Sun-Times seeking to seal the courtroom?" the judge responded, adding that Agay would have to meet an "extremely high burden" for him to do so.

Agay also argued that revealing information about the sales milestones could harm the company's ability to maximize sale proceeds by giving potential bidders information on how the company values itself.

"The Sun-Times is a distressed company in a very distressed industry," he noted.

The judge suggested that the request to approve the bonus plan may be premature, given that no sale process is in place, and no one has submitted a bid.

"I'm sitting here looking at the numbers, and I have no idea how to put them in context... It seems to me that we have a cart-before-the-horse issue," Sontchi said.

McDonough, testifying in open court, said a "small number" of parties have indicated a willingness to examine company data, and that one entity has expressed preliminary interest at a price of $22.5 million, which McDonough indicated was in the range of the sales milestones in the proposed bonus plan.