KANSAS CITY—The Bankruptcy Court on Friday approved terms of employment and the appointment of Craig Jung to serve as chief executive officer and a member of the board of directors for Interstate Bakeries Corp.
The court also approved a motion to extend the maturity date of I.B.C.’s post-petition debtor-in-possession financing facility to Feb. 9, 2008, from June 2, 2007. I.B.C. said it needed the extension in order to ensure sufficient financial backing and time to allow Mr. Jung an opportunity to review operations, refine its business plan and explore exit financing alternatives required to support a plan of reorganization.
"I believe in this company and its potential," said Mr. Jung, who worked at PepsiCo, Inc. for 11 years in a variety of senior executive assignments. "We have iconic brands, loyal customers and a workforce that wants to succeed. And, I believe we can."
Mr. Jung outlined four priorities for I.B.C.: fix the cost structure to grow margins; accelerate innovation to realize attractive revenue growth; drive productivity to improve margins, and create a performance culture.
"I subscribe to a proven strategic principle: Don’t reinforce failure; press harder when there’s success," he said. "Going forward, we will focus on core markets that are profitable, have positive cash flow and earn their cost of capital."
Mr. Jung, 53, replaces 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.
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.
Mr. Jung said cost structure is I.B.C.’s dominating challenge near term, followed by innovation.
"Despite the progress of the past two years, our cost structure has not been aligned to our revenue or today’s reality of higher commodity prices and intense competition," he said. "As a result, the company is still unprofitable and in Chapter 11. That has to change."
Mike Anderson, chairman of I.B.C.’s board of directors, said he believes Mr. Jung can lead change.
"We are gratified by the court’s decisions today," Mr. Anderson said. "Craig has deep consumer goods and direct-store-delivery experience and a proven track record leading difficult performance turnarounds. He is the right person to lead this company forward."