IBC: reaches deal to end standoff with Teamsters

Kansas City / MO. (wib) The U.S. Bankruptcy Court Western District of Missouri has given Interstate Bakeries Corporation (IBC) four more months to work out a new plan for exiting four years of bankruptcy. The court approved IBC´s motion to extend the deadline of its debtor-in-possession financing package to February 09, 2009. The court also agreed to let the Kansas City-based company borrow an additional 79 million USD under the financing arrangement. Attorneys for Interstate Bakeries say the company is close to working out an arrangement in which Ripplewood Holdings and Silver Point Finance will provide the company with money to operate after leaving bankruptcy. The Teamsters say they agree with the plan. The union has disagreed with past reorganization plans.

IBC Receives Commitments for Plan Funding
from Ripplewood and Key Pre-Petition Lenders

(Press release | 09.12. | ibc) Interstate Bakeries Corporation (IBC) announced that it has received plan funding commitments from an affiliate of Ripplewood Holdings L.L.C. and from Silver Point Finance LLC, Monarch Alternative Capital L.P. and McDonnell Investment Management LLC, lenders holding approximately 53 percent of IBC´s pre-petition secured debt, that form a basis for IBC to emerge from Chapter 11 as a stand-alone company. National representatives of IBC´s two major labor unions, which, together, represent nearly 17’000 IBC employees, have agreed to important modifications to their labor agreements that are an essential component of the plan funding commitments. The plan funding commitments do require that labor agreement modifications agreed to by national representatives must be ratified by the union locals before plan funding will be provided and IBC can emerge from Chapter 11.

The foundation for the revised plan of reorganization contemplated by the plan funding commitments emerged from intensive discussions that have been under way in recent weeks among IBC and its existing secured lenders, including Silver Point Finance, LLC, Monarch Alternative Capital L.P. and McDonnell Investment Management LLC, which have committed 339 million USD pursuant to a new secured term loan, Ripplewood Holdings L.L.C., an affiliate of which has committed 130 million USD of new capital to the reorganized IBC, and national representatives of two unions – the International Brotherhood of Teamsters (IBT), which represents about 8’500 IBC employees, and The Bakery, Confectionery, Tobacco Workers, and Grain Millers International Union (BCTGM), which represents about 8’200 IBC employees.

Craig Jung, CEO of Interstate Bakeries: «We believe that emergence from Chapter 11 as a stand-alone company is the best possible outcome for IBC´s constituents, employees, customers, and vendors. We are deeply appreciative of the willingness to compromise and sacrifice that our major unions and plan sponsors have shown, and the ongoing support that customers and vendors have extended to IBC. I am also grateful to and look forward to working with Ripplewood».

«This agreement provides the cornerstone for a revised plan of reorganization that will preserve the jobs of more than 22,000 IBC employees», Jung said. «It has the support of approximately 53 percent in amount of IBC´s pre-petition senior secured creditors, provides a fully underwritten exit financing commitment, and has the support of national representatives of IBC´s major labor unions for modifications to IBC´s existing labor contracts that will lower the Company´s cost structure and enable us to create sustainable competitive advantage to secure the Company’s future», he said.

John Cahill and Greg Murphy, Industrial Partners of Ripplewood Holdings L.L.C., a leading private equity firm, said, «We are very pleased to have reached this agreement under which Ripplewood has committed new capital that will enable the company to look confidently to its future. IBC has outstanding brands in the major bread and snack cake categories that we believe best position the Company for future success».

Upon completion of the reorganization, Cahill and Murphy will serve on IBC´s Board of Directors as Ripplewood representatives. Cahill was previously Chairman, President and CEO of The Pepsi Bottling Group and Murphy had been President and CEO of Kraft Food Bakery Companies. Both executives have had extensive food and beverage industry experience during their careers. «I have previously worked with Cahill and have come to know Murphy, and I have deep respect for both individuals», Jung said.

IBC said it will work closely with all parties involved in these commitments and other key constituents to develop and submit to the bankruptcy court a revised plan of reorganization and a revised disclosure statement that incorporate the terms of the new plan funding commitments. As required by the commitments, IBC must emerge from Chapter 11 by February 09, 2009.

Significant hurdles that must be cleared before the revised plan of reorganization can be implemented include, among other matters, obtaining bankruptcy court approval of plan funding commitments associated with the revised plan of reorganization, obtaining union ratification of modified contracts consistent with agreed-upon term sheets, modifying the plan of reorganization and disclosure statement to reflect new financing and labor terms as well as other pertinent changes, obtaining a bankruptcy court ruling that the disclosure statement contains sufficient information, making the disclosure statement and plan of reorganization available to all parties, soliciting votes for the plan of reorganization, obtaining confirmation of the plan of reorganization and satisfying the conditions set forth in the plan of reorganization to emerge from bankruptcy. There can be no assurance that these and all other conditions to the plan funding commitments will be satisfied on a timely basis.

Under the terms of the revised plan of reorganization contemplated by the new plan funding commitments, holders of general unsecured claims and holders of the existing common stock of IBC would have their respective rights cancelled, and would receive no distribution.

Along with other commitments, IBC´s secured lenders that have been providing debtor-in-possession (DIP) financing to IBC have agreed to extend their DIP financing arrangement until February 09, 2009 and provide up to approximately 329 million USD in aggregate financing to provide IBC with operating capital during the process of implementing the revised plan of reorganization. The bankruptcy court approved this amended DIP financing at a court hearing on September 12, 2008 (source).

Interstate Bakeries: Then and now

Here iss a slice of Interstate Bakeries Corporation (IBC) when it declared bankruptcy in September 2004 compared with September 2008:

September 2004
Sales (year ended May 29):	3,47 billion USD
Loss:	33,4 million USD
Employees:	32’000
Bakeries:	54
September 2008
Sales (year ended May 31):	2,8 billion USD
Loss:	143,7 million USD
Employees:	22’300
Bakeries:	41

_{About: Interstate Bakeries Corporation is one of the United States´ largest commercial bakers and distributors of fresh-baked bread and sweet goods, sold under various brand names. The Company is headquartered in Kansas City, Missouri. Interstate Bakeries Corporation filed for bankruptcy protection on September 22, 2004, citing liquidity issues resulting from declining sales, a high fixed-cost structure, excess industry capacity, rising employee healthcare and pension costs, and higher costs for ingredients and energy. The Company continues to operate its business in the ordinary course as a debtor-in-possession.}

About: Based in New York, Ripplewood Holdings L.L.C. is a leading private equity firm established in 1995 by Timothy C. Collins. Through five institutional private equity funds managed by Ripplewood, the firm has invested over 4,5 billion USD of equity in transactions in the U.S., Asia, Europe and the Middle East.