Koll Reorganization Includes a Little Something for Execs

Bolsa Chica developer Koll Real Estate Group Inc. won approval Tuesday for its reorganization plan and will emerge from its bankruptcy the first week in September--after the company exchanges $210 million in debt for company stock.

The approval by a federal bankruptcy judge in Delaware will erase all of its corporate debt and give the company a projected net worth of $140 million. It also will turn 90% of the company over to debt holders.

But some creditors and shareholders, many of them environmentalists, are still grumbling over certain elements of the plan--especially bonuses being paid to top executives.

“They are taking care of themselves at the expense of shareholders,” said Connie Boardman, who is a member of Bolsa Chica Land Trust, which considers itself a creditor because it is owed attorney fees by Koll Real Estate.

Under the plan, the developer’s top managers will receive so-called “stay” bonuses for sticking with Koll Real Estate throughout its recapitalization and for their “substantial efforts during the past several years.”

Chairman Donald Koll, for example, will get a $275,000 bonus, and Ray Pacini, the chief financial officer, will receive a $250,000 bonus. Those bonuses are in addition to salaries, which last year came to $330,200 for Koll and $268,000 for Pacini.

Why the big perks for executives who oversaw the company’s sagging fortunes?

Bankruptcy workout specialist Bill Brandt in Los Angeles said the bonuses should have raised a few eyebrows. Most boards offer them only if they are selling the company and need executives to stay to maintain the firm’s value.

Pacini disagrees and says the perks are common when a company completes a significant transaction. “This recapitalization was a significant event for us, putting us on strong financial footing,” he said. “Management should be compensated for that success.” Brandt said shareholders probably didn’t want to blow a $210-million reorganization over $750,000 in corporate bonuses.

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Melinda Fulmer covers real estate for The Times. She can be reached at (714) 966-7832 and at melinda.fulmer@latimes.com