KANSAS CITY — Judge Jerry Venters said Interstate Bakeries Corp. (I.B.C.) may seek creditor approval for the company’s reorganization plan at a Jan. 29 hearing before the U.S. Bankruptcy Court for the Western District of Missouri. If I.B.C. is successful, it could seek confirmation of its plan in six weeks.
With the International Brotherhood of Teamsters still opposing the plan, uncertainty continued to surround the outlook for I.B.C. Still, more than three years into the bankruptcy case, Mr. Venters expressed the view that I.B.C. should have the chance to gain approval for its plan.
"We need to move this case along and find out if this plan works," he said. "And if not, we’ll go from there."
Under the plan, Silver Point Finance L.L.C. will provide Interstate with up to $400 million in exit financing upon the company’s emergence from Chapter 11. I.B.C. said it has the agreement by holders of about 95% of the company’s pre-petition senior credit facility to support the reorganization plan.
More than half of the creditors or creditors holding more than two-thirds of the value of claims must approve the plan for it to be confirmed.
The plan estimates that secured creditors and most classes of creditors would recover 100% of what is owed by I.B.C. Claims in these classes total $524 million, including $450 million in prepetition lender claims. Control Group Liability Claims totaling $18.8 million associated with certain defined liability plans were projected to recover 36.7%. Old convertible notes with a value of $100.9 million were projected to recover 33.3%. General Electric credit claims totaling $6,125,000 were projected to have a recovery of 29.1%. Other unsecured claims, totaling $194 million, were projected to recover 26.1%.
Holders of claims pursuant to the prepetition credit facility will receive a distribution of new junior secured debt obligations, subordinated convertible secured debt obligations and Class A common stock. The common stock would be reduced to the extent they are repaid with cash raised through a rights offering of Class B common stock. Unsecured creditors will receive Class B common stock and the right to purchase class B common stock. The existing common stock of the company will be cancelled.
Class A common stock (3,333,333 shares) will have supermajority voting rights with votes per share to be calculated so that the prepetition lenders will maintain majority control. Class B shares (50 million) will have one vote per share.
In its plan, I.B.C. forecast fiscal 2008 (year ended May 31) sales of $2,824.8 million and a net loss of $148.3 million. For the two years afterward, I.B.C. projected modest sales growth to $2,902.4 million and $3,031.4 million, respectively. Interstate forecasted a loss of $34.5 million for fiscal 2009 and profits of $1.6 million in fiscal 2010.
In its valuation analysis, I.B.C. said the Silver Point transaction was based on an enterprise value of $580 million, including a common equity value of $105 million.
By contrast, Flowers Foods, Inc., a publicly-traded baking company projecting 2008 annual sales of $2 billion, has a market value of $2 billion.
"We are pleased that the court approved our disclosure statement, as that means we continue to have a credible business plan capable of paving our emergence from Chapter 11 and achieving sustainable profitability," said Craig Jung, I.B.C. chief executive officer. "The Court’s approval of the Company’s disclosure statement also means that Silver Point’s committed financing will remain in place and available until March 14."
In filings with the judge, the Teamsters had opposed giving I.B.C. the go-ahead on soliciting support for the plan. The Teamsters said the plan could not go forward because it would rather see the baking company liquidated than to agree to the "massive concessions" the union said I.B.C. is demanding.
I.B.C. acknowledged the plan remains contingent on the company reaching a mutually acceptable agreement with The Teamsters, who represent 9,500 of the 25,000 I.B.C. employees.
The two sides have not negotiated since October. A representative of The Teamsters reached by Milling & Baking News declined to comment on the judge’s decision.
I.B.C. said it is exploring alternative options, in the event its plan is not implemented. These plans include "a potential sale of the company in its entirety or in a series of transactions."