Bankrupt Vesta hiring outside finance help
Friday, September 01, 2006
RUSSELL HUBBARD
News staff writer
Lawyers for bankrupt Vesta Insurance Group on Thursday received court permission to pay outside managers up to $225 an hour - just a week after getting approval to pay each of the six top executives an average of $12,000 a week to stay on board during the crisis.
The Birmingham-based company, which fired about one-third of its 300 workers this month after it became insolvent, said this week in court filings it needed to pay an outside contractor to administer things. U.S. Bankruptcy Court in Birmingham agreed.
The interim financial manager is Kevin O'Halloran and comes from a company called Newbridge Management, which hires out such experts to troubled companies. The hiring comes just a week after Vesta told the court that six top executives, including Chief Executive David Lacefield, were "indispensable" and had to be paid an average of $12,000 week to keep the company running while it restructures its debts.
"Kevin O'Halloran has years of experience in assisting struggling companies," Vesta told the court in a filing. "He has an extensive background in accounting and financial issues."
Last week, Vesta got special court permission to pay $12,000 a week in emergency salaries for the top executives. They included managers skilled in the same areas of finance and accounting as O'Halloran, such as Chief Financial Officer John Hines and Controller Edwin Meadows.
But a week after getting the special pay, some of the top executives have quit. Vesta said the defections include Hines and Meadows.
"As a result, there is currently a need for support staff," Vesta said in the court filing that asked to hire Newbridge.
The company also said in the filing it might pay other Newbridge experts up to $175 a hour.
Vesta, which sold personal and homeowner insurance, is under government supervision after regulators in Texas, Florida and Hawaii deemed it insolvent last month. It is in Chapter 11 bankruptcy protection, meaning it can still operate while it figures out how to pay creditors owed $214 million.
But insurance regulators have barred the company from taking on new policyholders, which means operations largely consist of processing claims from old customers.
This week Vesta also asked for permission to pay $137,000 in ordinary expenses, such as $10,000 to a document storage company and $17,878 to Alabama Power.
Vesta shares trade for 1 cent on the Pink Sheets. Bondholders are unpaid and thousands of customers on the northern Atlantic Coast have found themselves without hurricane insurance after regulators there told them to find new coverage.
