New Century to pay bonus to executives

New Century Financial Corp., an Irvine-based sub-prime mortgage lender being liquidated in bankruptcy, won court permission Monday to pay about $3.2 million in bonuses to 116 executives and key managers.

The approved plan was sharply scaled back from the company’s initial proposal, which would have paid $6.3 million to employees, including Chief Executive Brad Morrice. In a move to placate creditors, Morrice and two other senior executives were removed from the list of those eligible for bonuses.

New Century issued a statement saying the bonus plan would help the company maximize the value of its assets for sale “by keeping critical employees in those business units incentivized and in place.”

Most of the bonus money is tied to the managers’ ability to attract buyers for the company’s main assets, New Century financial advisor Holly Etlin said during a hearing at U.S. Bankruptcy Court in Wilmington, Del.

“The employees that are in these plans are the bare minimum necessary,” Etlin said.

New Century has been trying to auction its major assets since it filed for bankruptcy April 2.

On Monday a judge approved the sale, for $58 million, of $170 million in mortgages made by New Century before it went bankrupt.

Last week New Century failed to attract a buyer for its main lending unit, so the company fired 2,000 employees, reducing its workforce to about 750.

U.S. Bankruptcy Judge Kevin J. Carey rejected opposition to the bonus plan from the U.S. Trustee’s Office, which monitors bankruptcies as an arm of the Justice Department. Attorneys for the U.S. Trustee argued that too many high-level executives were being paid.

In a separate ruling, Carey gave the company permission to borrow as much as $100 million while it auctions its remaining assets and winds down operations.

Carey rejected a request by former employees to band together as a court-sanctioned -- and company-financed -- creditors’ panel.

Carey ruled employees must pay their own legal bills as they try to recover $40 million that they say New Century owes them.