KANSAS CITY — Interstate Bakeries Corp. and The Teamsters have agreed to end their standoff over a new union contract, a move that will allow the bankrupt wholesale baker to reorganize with financial support from Ripplewood Holdings L.L.C.
The announcement was made as part of a hearing Friday morning in the U.S. Bankruptcy Court Western District of Missouri in which the court ruled to allow I.B.C.’s request to borrow an additional $79 million under its debtors-in-possession (DIP) financing, as well as its request to extend the expiration deadline on the DIP financing to Feb. 7, 2009, from Sept. 30, 2008.
I.B.C. said it has received plan funding commitments from an affiliate of Ripplewood Holdings L.L.C. and from Silver Point Finance, L.L.C., Monarch Alternative Capital L.P. and McDonnell Investment Management L.L.C., lenders holding approximately 53% of I.B.C.’s pre-petition secured debt. In addition, I.B.C. said national representatives of its two major labor unions, which, together, represent nearly 17,000 I.B.C. employees, have agreed to important modifications to their labor agreements that are an essential component of the plan funding commitments.
I.B.C. cautioned that the plan funding commitments require that labor agreement modifications agreed to by national representatives must be ratified by the union locals before plan funding will be provided and I.B.C. may emerge from Chapter 11.
"We believe that emergence from Chapter 11 as a stand-alone company is the best possible outcome for I.B.C.’s constituents, employees, customers, and vendors," said Craig Jung, chief executive officer of I.B.C. "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 I.B.C. 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. It has the support of approximately 53% in amount of I.B.C.’s pre-petition senior secured creditors, provides a fully underwritten exit financing commitment, and has the support of national representatives of I.B.C.’s major labor unions for modifications to I.B.C.’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."
Upon completion of the reorganization, John Cahill and Greg Murphy, industrial partners of Ripplewood Holdings L.L.C., will serve on I.B.C.’s board of directors as Ripplewood representatives. Mr. Cahill was previously chairman, president and c.e.o. of The Pepsi Bottling Group and Mr. Murphy had been president and c.e.o. of Kraft Food Bakery Companies.
"I have previously worked with Mr. Cahill and have come to know Mr. Murphy, and I have deep respect for both individuals," Mr. Jung said.
I.B.C. pointed that several significant hurdles must be cleared before the revised plan of reorganization may be implemented, including 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.