KANSAS CITY — A little more than two years after filing for Chapter 11 bankruptcy and hiring a turnaround firm to improve operations, Interstate Bakeries Corp. on Tuesday filed a motion with the Bankruptcy Court requesting authorization to enter into an employment agreement with Craig D. Jung as its new chief executive officer and a member of the company’s newly reconstituted board of directors. The motion is scheduled to be heard Feb. 16 and, if approved, would become effective immediately.
Mr. Jung, 53, will replace Tony Alvarez II, co-founder and co-c.e.o. of Alvarez & Marsal, a corporate advisory and turnaround management services firm. Mr. Alvarez has been c.e.o. of I.B.C. since the company filed Chapter 11 in September 2004.
Michael Anderson, a longtime member of I.B.C.’s board of directors who was elected board chairman on Jan. 24, said, "Craig Jung is the right choice to lead the company going forward. He is a highly respected executive with prior c.e.o. and c.o.o. experience and a proven track record in leading performance turnarounds."
Prior to being named c.e.o. at I.B.C., Mr. Jung was c.e.o. of Panamerican Beverages, formerly the third-largest Coca-Cola bottler in the world with $2.6 billion of revenues. In May 2003, Mr. Jung led the sale of Panamco, Panamerican Beverages’ successor, to Coca-Cola FEMSA, S.A. de C.V. in a transaction valued at $3.6 billion. He also was founding chief operating officer of Pepsi Bottling Group, helping take that company public in a $5 billion initial public offering in 1999.
Mr. Jung worked at PepsiCo for 11 years, holding a variety of senior executive assignments in general management, marketing and sales. His assignments at PepsiCo included successfully turning around revenue and profit performances at Frito-Lay’s Canadian operations, and leading a successful turnaround of Pepsi-Cola’s South American operations. Mr. Jung started his career at Procter & Gamble, where he rose to brand manager.
Mr. Jung graduated in 1975 from West Point and received a master’s degree in public administration from Harvard University in 2004.
Under terms of a three-year employment agreement, Mr. Jung will receive an annual base salary of $900,000 and a signing bonus of $1.2 million. Beginning with the 2009 fiscal year, he will be eligible to participate in the company’s annual performance bonus plan. In the event company performance objectives are met, I.B.C. said Mr. Jung will be entitled to receive an annual bonus equal to 100% of his base salary. Mr. Jung will be entitled to receive additional cash awards for enterprise value created during the bankruptcy period, as well as equity once the company emerges from Chapter 11.
In addition to the naming of Mr. Jung as c.e.o., I.B.C. on Tuesday filed a motion with the Bankruptcy Court seeking approval of, among other things, an extension of the maturity date of its post-petition debtor-in-possession (DIP) financing facility to Feb. 9, 2008. The DIP financing facility is currently set to expire on June 2, 2007. The hearing on the amendment is scheduled for Feb. 16, in conjunction with the hearing to approve Mr. Jung’s employment agreement.
To date, I.B.C. has not borrowed under its $200 million DIP financing facility, although it has issued letters of credit under the facility in the amount of $109.1 million, primarily in support of the company’s insurance programs. Availability under the DIP facility is currently $69.3 million, I.B.C. said.
I.B.C. said that it is "optimistic" that it will receive the support of the lenders that are party to the DIP financing facility to extend the facility through Feb. 9, 2008, as well as the consent of the pre-petition lenders to such transactions.
In a separate announcement, I.B.C. said that David Weinstein, a member of its board of directors who had been serving as lead director, has resigned effective immediately. No timetable has been established for filling the vacancy created as a result of Mr. Weinstein’s resignation.