Gateway managers could make 50m pounds: Bonuses to be tied to success of restructuring

SENIOR management of Gateway, the struggling supermarket chain, could share in bonuses worth more than pounds 50m if they achieve performance targets set as part of the restructuring of its pounds 1.4bn debt.

A circular giving details of the restructuring, sent to shareholders yesterday, discloses details of the scheme under which payments will be made into a long-term bonus fund until 1998, depending on Gateway's value and the level of its repayments to Isosceles, its parent company.

The pounds 50m would be payable if 'value achieved' in the business - based either on results or on an independent assessment of its worth - exceeds pounds 1.8bn, while pounds 1m would be paid if the value is pounds 300m. Gateway's net assets following the restructuring will be pounds 300m.

Payments to management could be made if the group has made more than pounds 500m repayments by April 1996, and met its operating profit targets in each of the three years until then. If debt repayments are lower, the bonus payments will depend on an independently assessed valuation.

The document does not reveal the participants in the scheme although it says that David Simons, who took over as chief executive in January, will get half the bonus if the value achieved is pounds 300m or less, falling to a third if it exceeds pounds 700m.

The senior managers will also share in an annual scheme based on operating profits, with a maximum payment equal to the participant's salary if profits are 1.7 times the budget.

The document reveals that operating profits in the 28 weeks to 7 November fell from pounds 102.3m to pounds 71.2m, but the pounds 25.9m costs of the refinancing of pounds 109m of reorganisation provisions and losses on disposals meant there was an attributable loss of pounds 306.4m.

Mr Simons said that Gateway's Price Check scheme of price cuts launched three weeks ago had stemmed the like-for-like decline in sales that has been dogging the group, although he declined to give details of the increases.

The debt restructuring will leave Gateway with pounds 500m of debt, while the rest will be retained by Isosceles - to which Gateway has obligation to make payments. It has already been agreed by its bankers. Shareholders are due to vote on the proposals on 2 July although 90 per cent have already irrevocably approved.