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GenOn Energy Bankruptcy Incentive Plan Filed

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GenOn Energy filed with the U.S. Bankruptcy Court a motion for entry of an order authorizing and approving the Debtors’ cash incentive plan.

The motion explains, “To incentivize the Participants, the Cash Incentive Plan provides for a variable cash award (a) earned upon entry into definitive documentation for any Sale Transaction during a Participant’s employment term (and payable subject to the closing of such Sale Transaction) (a ‘Sale Bonus’); and (b) earned and payable upon the conclusion of a 90-day period following the Effective Date of the Plan (the ‘VWAP Period’) for measuring the achievement of certain performance objectives that increase distributable value under the Plan to Holders of GenOn Notes Claims (a ‘Value Creation Bonus’ and, together with a Sale Bonus, a ‘Cash Incentive Bonus’).”

In addition, “The size of the Sale Pool will vary depending on the aggregate amount of Sale Proceeds received. Importantly, however, the percentage of Sale Proceeds reserved for the Sale Pool will remain constant at 0.425% regardless of the amount of Sale Proceeds ultimately generated to afford the Debtors maximum flexibility in conducting the sale process, which may include multiple Sale Transactions at varying price points….The size of the Value Creation Pool will vary depending on the aggregate amount of Value Creation above a baseline recovery threshold for Holders of GenOn Notes Claims under the Plan. This baseline recovery (the ‘Threshold Plan Recovery’) is based on the total distributable value to Holders of Allowed GenOn Notes Claims under the Plan assuming a 68 percent recovery on account of such claims (i.e., approximately $1.275 billion). Value Creation will be measured based on the market adjusted enterprise value (the ‘Market AEV’) of the Reorganized Debtors above the Threshold Plan Recovery during the VWAP Period.”

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