Tag Archives: Bonuses

McDermott seeks large bonuses for senior management while in bankruptcy

Photo: Nandu Chitnis

McDermott has filed a motion with the Bankruptcy court seeking approval for an employee retention plan for both senior executives and key employees who are not executives. CEO David Dickson could receive $6.3 million in 2020 if the company hits its targets.



As a reminder, the company, which is based in west Houston, awarded Mr Dickson a $3.375 million cash retention bonus only last October. The company filed for Chapter 11 bankruptcy in January 2020, at which point the company paid out the last 30% of that award, even though it wasn’t technically earned.

Quarterly retention bonuses

The retention bonuses will be paid quarterly in cash. The senior executives and their target bonuses are as follows;

  • David Dickson (CEO) – $6.3 million
  • Chris Krummel (CFO) – $1.2 million
  • John Freeman (Chief Legal Officer) – $1.1 million
  • Samik Mukherjee (COO) – $1.3 million
  • Ian Prescott (Senior VP, Asia Pacific) – $423,000

The bonuses are dependent on the following performance metric;

  • Adjusted EBITDA  (27.5%)
  • Available cash balance (27.5%)
  • Technology Business sale proceeds (15%)
  • Safety (15%)
  • Achievement targets (15%)

The maximum payout is 200% of target, so Dickson could get $12.6 million.

The incentive scheme runs until the end of 2020, irrespective of whether McDermott exits Chapter 11 before then.

In October 2019, senior management got $7 million in bonuses

Freeman, Mukherjee and Prescott also got retention bonuses in October, similar to the targets above. Then-CFO Stuart Spence got $1.3 million, only to leave the company two weeks later. He got to keep his bonus, of course. If Mr Krummel got a bonus at that time, it wasn’t disclosed.

What’s particularly galling to me, is that, in October, when McDermott got their expensive financing and gave out the retention bonuses, the company was forecasting adjusted EBITDA for 2019 of $474 million. By the time they filed for bankruptcy three months later, that figure had been reduced to $183 million. They did meet their 2019 free cash flow forecast – an outflow of $1.2 billion – but only because they held back $300 million in payments to vendors.

There’s no real details on the key employees scheme, other than payments will be in fixed amounts, paid quarterly.

[UPDATE 02-16-20 Having reviewed the document filed with the bankruptcy court there are 13 employees in the senior executive plan. In the key employee plan there are 1,112 employees expected to receive a retention bonus worth a total of $79.4 million, an average of $71,403 each].

A reminder of how the company got into this mess

The bankruptcy stems from McDermott’s disastrous acquisition of fellow Houston company, CB&I in May 2018 for $4.1 billion ($2.4 billion cash, $1.7 billion stock). CB&I had a lot of legacy Engineering & Construction projects that have turned out to be much less profitable than McDermott expected at acquisition.

The costs to complete estimated at acquisition on just 3 projects (Cameron LNG, Freeport LNG and Calpine Power) increased by over $1 billion. As a result, the goodwill on CB&I ended up being $4.8 billion. McDermott wrote down $2.1 billion in goodwill 7 months after acquisition. That’s a quick destruction of shareholder value!

After the deal closed, Mr Dickson received a 25% increase in base salary to $1.125 million and a $1.125 cash bonus for completing the acquisition.

SEC filing – McDermott bankruptcy bonuses

20-30336 doc 367 – McDermott incentive scheme filed with Bankruptcy court

Anadarko gives $1m transaction bonuses to 3 senior executives

Last week Anadarko announced that it was recommending the $38 billion takeover offer from Occidental Petroleum, having previously backed the $33 billion offer from Chevron. At the same time, the company announced it was paying a $1 million transaction bonus to each of three senior executives.

The bonuses were approved in recognition of their ‘extraordinary efforts to consummate the merger’. The bonuses are to be paid to

    • Bob Gwin – President
    • Ben Fink – CFO
    • Amanda McMillian – General Counsel

Change of Control payments

The bonuses are on top of the change-of-control payments that these individuals would be due under the terms of the takeover. Rather unethically, but not illegally, the Anadarko Board improved the terms of the change-of-control provisions ONE day before recommending the original deal from Chevron.



According to the Wall Street Journal, the payout for the CEO Al Walker in the event of a takeover would increase by $6.7 million to $43 million. In total, all the top executives will receive $125 million, up to $22 million more than before the payout changes.

By my calculations, before the changes described above, Mr Gwin will receive a change-of-control payment of around $29 million. Mr Fink and Ms McMillian will receive around $12 million each.

Execs helped the Board out of a jam

It didn’t reflect well on the Anadarko Board that they were negotiating in parallel with Chevron and Oxy before announcing an agreement with Chevron on April 12 for the lower offer. Had that deal stuck, there probably would have been plenty of lawsuits filed, alleging that they weren’t looking after the interests of shareholders.

I suspect the hard work of Gwin, Fink and McMillian and the persistence of Oxy, has bailed the Board out, albeit at the expense of a $1 billion termination fee due to Chevron.

Insider Trading

On a separate matter, there are no new developments on the identify of the person who made $2.5 million in profits on alleged insider trading of Anadarko stock.

SEC filing

Struggling Helicopter company switches to cash bonuses

Bristow Group, the struggling helicopter company with its head office in west Houston, announced that it has received a warning from the NYSE that its average closing price of its stock has been under $1 over the past 30 days. The company has 6 months to regain compliance with the $1 minimum share price. Otherwise the company could be delisted.

The share price is currently 37 cents (market cap $14 million).



Cash retention bonuses

In the same SEC filing, the company announced that it had paid cash retention bonuses to 9 executive officers.  CEO Don Miller got $945,000 and CFO Brian Allman got $400,000.

It also announced that, from Oct 1, 2019 onwards, certain executives will receive quarterly cash bonuses based on performance and operational targets. These will replace equity incentives. The target award is $942,000 for the CEO Don Miller and $250,000 for the CFO. The filing doesn’t specify how many executives will be receiving quarterly bonuses. The maximum bonus that could be paid out is double the target.

I don’t understand why Mr Miller and Mr Allman should be receiving retention bonuses at this time. Mr Miller was promoted from CFO to CEO on 1 March 2019 and Mr Allman was promoted from Chief Accounting Officer to CFO the same day. They should prove themselves in their current roles before being given retention bonuses.

Material weakness in Internal Controls

The company, which has a March year end, still hasn’t filed its 10-Q for the quarter ending December 31, 2018. The delay was because it found a material weakness in its internal controls related to certain covenants.

The company has a clause in its lending agreement that pledged engines in its helicopter fleet may be swapped with ‘loaner’ engines supplied by a maintenance company, provided that the ‘loaner’ is replaced with the original engine (or similar) within 180 days. The company found that some ‘loaner’ engines had been on the airframes for more than 180 days.

Failed acquisition and Expensive advisers

The company is coming off a spectacular failed acquisition that cost it a $20 million termination fee and elected not to make a $12.5 million interest payment on its senior loan notes. It has hired Alvarez and Marsal and Houlihan Lokey to advise on strategic alternatives.

The company has stated that in its upcoming annual report it will disclose a substantial doubt about the company’s ability to continue as a going concern.

Activist Investor

On May 8, an activist investor, Global Value Investment Corp, filed a proxy statement. It alleges that the company has failed to cut costs quickly enough. GVIC states that Bristow has

  • a fleet of 16 owned H225 helicopters that have not flown commercially since mid-2016 because of a fatal crash of another company’s H225 model. GVIC believes this fleet is worth at least $90 million. It alleges that Bristow has not actively tried to sell this fleet.
  • Two fixed-wing airlines, Eastern Airways (based in the UK) and Airnorth (Australia) that will have negative EBITDA for the year ended March 31, 2019. GVIC believes these could be sold for up to $230 million.



GVIC has called for the resignation of four directors and proposed its slate of alternatives. If GVIC gets control of the board it states it will replace Mr Miller as CEO.

If Mr Miller is forced out, he won’t have to pay back his retention bonus. He will also a severance payment equivalent to 2 x base salary of $700,000 plus prorated annual incentive target bonus ($770,000).

SEC filing

Global Value Investment Proxy