Court OKs Pay Deal for Chief at Global

The top executive trying to revamp Global Crossing Ltd.’s operations will be paid as much as $5.3 million a year in salary, bonus and retention incentives, under a package approved by a Bankruptcy Court judge in New York.

The court’s ruling means that John J. Legere, installed last fall as chief executive of the faltering fiber-optic networking company, will get more than $7.5 million in cash payments withheld pending the court’s decision.

That money consists of a $3.5-million signing bonus, nearly the same amount to cover taxes on the bonus and the rest in back pay. In January, he received nearly $4.8 million to cover taxes on a $15-million loan from a subsidiary.

The contract approved by the court includes a quarterly $800,000 payment to encourage him to stay and help revive the company. The so-called retention payment is one of the new twists on a generous compensation package that also includes stock options, a potentially lucrative perk should Legere be able to restructure the company.

Global Crossing, whose Jan. 28 filing for bankruptcy protection marked the nation’s biggest telecommunications collapse, also would pay Legere as much as $4 million if he can help the firm obtain up to $1.3 billion in new financing or in proceeds from the sale of the company or its assets.

The company’s bankers and unsecured creditors had been at odds over Legere’s pay. Bankers, who favor selling the company as soon as is practical, wanted a much smaller package. Other creditors, though, figure that any return they get in the future would be worth more than they could get now: The proceeds from any sale would go first to repay loans before they recover anything.

Unsecured creditors favor a long-term plan to turn around Global. The company itself is proposing that it seek new investors and continue as an independent telecommunications enterprise.

Until then, the banks probably need Legere in place through any possible sale.

“He’s helping to try to create value that someone else would pay for,” one person involved in the bankruptcy proceedings said Wednesday. “The banks can’t afford to have him walk away now.”

The fluid nature of bankruptcy proceedings could lead some banks to lend more money and become longer-term players.

Global Crossing did not comment.

Legere’s salary of $1.1 million a year was reduced 30% after the bankruptcy petition was filed to $770,000 until a reorganization plan is approved or a sale is made. That remains the same under the revised contract. His quarterly retention payments of $800,000 begin Aug. 1. He will receive a bonus of 125% of the original $1.1-million salary if certain performance goals are met--a bonus of $1.375 million.

Those three provisions give him more than $5.3 million a year. Besides the possible $4-million fee, he also will have a company-paid $6-million life insurance policy.

Legere will have to cover more of his own taxes from what was designed as a $15-million loan that he did not have to repay. The loan came from his prior position as CEO at Asia Global Crossing Ltd., Global’s 58%-owned subsidiary.

The parent company, on hiring him, agreed to pay $13.5 million in taxes and had paid nearly $4.8 million to date. Under the court- approved deal, Legere will have to pay the remainder himself.