Ascend Performance Materials Holdings Inc., one of the world's largest producers of nylon 6,6 materials, has asked a bankruptcy court to approve a $2 million incentive plan for its top executives as it navigates Chapter 11 proceedings. The company filed a motion on May 16 in the U.S. Bankruptcy Court for the Southern District of Texas seeking approval of a Key Employee Incentive Plan (KEIP) designed to retain and motivate 11 senior leaders during its restructuring process.
The proposed KEIP would provide cash incentives to executives only if they meet challenging performance goals tied to operational EBITDA targets. The plan sets a target payout of $1.97 million, with potential payments ranging from $983,200 at threshold performance to $2.46 million at maximum achievement levels.
"The Debtors' ongoing success depends on the skill, dedication, knowledge, and loyalty of its management," stated Robert Del Genio, Ascend's Chief Restructuring Officer, in a declaration supporting the motion. "Without the KEIP Participants' services, the Debtors will be unable to successfully maintain their operations during the pendency of these chapter 11 cases and likely experience severe business disruption from any attendant employee turnover."
The KEIP participants include the President and CEO, along with ten other senior executives responsible for the company's global operations across technology, finance, legal, human resources, and commercial departments. The executives would receive awards based on achieving the company's 2025 Operational EBITDA Goal of $124.1 million, which represents an 18 percent increase from the company's 2024 adjusted operating EBITDA.
According to court filings, the incentive payments would be measured and paid in two installments – first at the end of the third month following the bankruptcy filing, and again in the month before the company's planned emergence from bankruptcy, which is expected by August 29, 2025.
"The KEIP Participants have seen a substantial increase in their workloads without any concomitant increase in their compensation," Del Genio noted. The filing highlights that in the months leading up to bankruptcy, these executives implemented several initiatives to manage cash flows, including imposing strict spending controls, rationalizing costs, and entering approximately $250 million in sale-leaseback transactions.
Gilbert Jones, a compensation expert from FTI Consulting, testified in court documents that the incentive plan is reasonable compared to similar programs at other bankrupt companies. FTI benchmarked the plan against 13 peer companies with similar financials, finding that Ascend's target cost per participant falls in the 8th percentile of the peer group, with the total cost landing at the 31st percentile. The KEIP represents just 0.10 percent of the company's funded debt, placing it at the 23rd percentile compared to peer companies.
Interestingly, the filings reveal that the KEIP participants' go-forward compensation actually represents a 5 percent decrease from their pre-bankruptcy compensation levels, suggesting that the incentives are designed to motivate rather than simply enhance pay.
The incentive plan has already received support from the company's Ad Hoc Group of Term Loan Lenders, according to court documents. The Special Committee of Ascend's board of directors recommended the KEIP, and the board unanimously approved it, subject to bankruptcy court approval.
Ascend cites several legal precedents in its motion, arguing that the KEIP satisfies both the business judgment standard under section 363(b) of the Bankruptcy Code and the "facts and circumstances" test under section 503(c)(3). The company emphasized that the plan is incentive-based rather than retention-based, as participants will only receive payments if they achieve challenging operational targets.
A hearing on the motion is scheduled for June 10, 2025, at 2:00 p.m. before Judge Lopez in the U.S. Bankruptcy Court for the Southern District of Texas.
Ascend Performance Materials, which describes itself as a leading provider of high-performance engineered materials with operations throughout the U.S., Europe, and Asia, is represented in its bankruptcy proceedings by Kirkland & Ellis LLP and Bracewell LLP as proposed co-counsel.
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