A U.S. Bankruptcy Court judge approved $728,000 in bonus payments for employees of embattled engineering firm Birdsall Services Group (BSG) on Monday, a move officials said would help stabilize the firm’s workforce as plans move ahead to sell the firm’s assets.
More than $200,000 would go to 19 senior managers, including Acting President and CEO Ralph Orlando and Chief Financial Officer William Barron. The remaining $525,000, according to court documents, is slated to be dispersed among the firm’s 200 remaining employees. Some of the listed employees, however, have already parted ways with the company.
The bonuses are necessary, said Edwin Stier, BSG’s federally appointed bankruptcy trustee, to help counteract the uncertainty that has led approximately 100 of the firm’s more than 300 employees to leave the company since CEO Howard Birdsall and six other executives were indicted on charges of alleged “pay-to-play” violations in March.
“Part of ensuring that we are able to pay off all of our creditors at the end of the line is to pay these retention bonuses, so that our people are willing to stay on into new ownership,” said Stier, a former federal and New Jersey prosecutor appointed by the Office of the U.S. Trustee in mid-April to oversee BSG’s bankruptcy proceedings.
“When I got there, people were literally walking out the door. It was an hour-by-hour struggle to keep this company together. Things have now stabilized. People have seemed to regain their footing and their enthusiasm for their work. I’m not saying that we are completely out of the woods, but things have improved.”
On May 3, BSG spokesman Joe Orlando said the firm had agreed to terms on a letter of intent with Partner Engineering and Science Inc., a California-based engineering firm seeking to buy the Eatontown-based company’s assets. The letter of intent is a non-binding agreement that lays out the essential terms of sale, according to Stier.
If the bankruptcy court approves the agreement, BSG and Partner Engineering and Science would then negotiate a binding purchase agreement, which Stier said could occur within a week’s time.
“We would then publicize that agreement so that other potential buyers can see it,” Stier said. “They would have the opportunity to do their own due diligence, if they are interested in the company’s assets.”
An auction would then be held in which any qualified bidder would be allowed to offer a “better deal” for BSG’s existing contracts, buildings, desks and all other assets. Partner Science and Engineering would also have the ability to revise its offer, if necessary, Stier said.
BSG and its sister company, BSG Engineering, New York, had combined revenues of approximately $49.5 million in 2012, according to court filings.
If BSG’s assets are sold, the firm’s existing contracts would be transferred to the purchasing company, along with any current employees the company chooses to hire, Stier said.
“It is done all the time with firms like this,” he said. “It would be the same people doing the same work they would have been doing previously.”
“Some municipality or agency might not be willing to transfer the contract,” he added. “If necessary, [the work] could be completed under the Birdsall name, and the proceeds would be turned over to the buyer.”
Municipalities and other BSG clients would also have the option of canceling their existing BSG contracts, as many throughout the state did in the wake of the indictments and the company’s March 29 bankruptcy filing.
In Monmouth County, where BSG is currently under contract for 10 projects totaling $1.6 million, Freeholder Director Thomas Arnone said BSG will not be contracted for future engineering work, and the county will keep a close eye on the company’s ongoing projects as the potential sale plays out.
“Obviously I’m expecting the contracts to be honored, but they will be supervised very carefully,” he said. “The workmanship of Birdsall was never an issue. The problem they have there is internal, obviously. That’s why I was very strong on allowing the contracts to be finished. I didn’t want to put any additional burden on the taxpayers of Monmouth County with the added costs of going out to rebid.”
“If there is a sale, we will have extreme oversight on those projects, even more than we do now,” he added. “I will tell you that if the potential comes up that the workmanship isn’t at the same level, we will release those contracts and we will go forward to rebid. Do I want to do that? Absolutely not. But it is something we will keep a very close eye on.”
According to Orlando, BSG has fielded competitive offers from a number of potential buyers, all of whom are interested in safeguarding the “hallmark” of the company: its employees.
“Everything that we have heard so far is that these companies want to come in and establish a presence here, either in the state or the region,” he said. “No one at the employee level has been accused of wrongdoing, and I don’t think anybody would argue about the capabilities of those employees. That’s what makes it attractive to a potential buyer.”
Stier agreed, saying both the sale and the bonuses would help keep BSG’s workforce in place, therefore increasing the value of the company.
“The assets of the company are essentially people. We don’t manufacture anything. We are not a real estate company. Our assets are the business units that are performing literally thousands of contracts,” he said.
“When the crisis hit Birdsall, many of our people were offered substantially more money than they were making to work elsewhere. And a lot of our people did exactly that … It’s important to keep everybody together doing what they have been doing.”
BSG is confident that the pending sale will net the firm enough money to pay off its numerous creditors, Stier said.
“There are a lot of moving parts to this, but I feel very optimistic that we are going to get there,” he said.