Unsecured creditors speak out against I.B.C. plan
September 30, 2008
by Eric Schroeder
KANSAS CITY — The proposed reorganization plan put forth earlier this month by Interstate Bakeries Corp. has come under fire from the company’s unsecured creditors. The creditors, who are owed approximately $330 million, in a Sept. 29 filing with the U.S. Bankruptcy Court for the Western District of Missouri claimed the plan is too expensive and provides no payoff of what they are owed.
In the filing, the unsecured creditors, which includes suppliers and noteholders who own debt that is not guaranteed by any collateral, said I.B.C. is "again seeking to unconditionally commit the estates to significant fees and reimbursement obligations in connection with a transaction whose prospects of being consummated remain speculative at best."
"The proposed transaction lacks the support of the committee and other constituents and the debtors (I.B.C.) have offered no explanation for how unsecured creditors will benefit if the motion is approved," the unsecured creditors said.
As part of the funding proposal put forth by I.B.C., the wholesale baker would be required to pay approximately $23 million in commitment fees, with approximately $3.25 million of the fees and all the reimbursement expenses immediately payable by I.B.C., without credit, refund or any court review.
The unsecured creditors urged the court to deny the motion in part because it is subject to wide ranging contingencies, a scenario they said adversely affected I.B.C. in earlier talks.
"(I.B.C.) should not be allowed to make the same mistake they did earlier this year by entering into the Silver Point Commitment — paying large fees and getting nothing in return," the unsecured creditors said.
Another issue of contention in the filing was the unsecured creditors’ skepticism that I.B.C. will reach a deal with its unions.
"This is a task that (I.B.C.) has simply been unable to accomplish since the commencement of the (bankruptcy) case," the unsecured creditors said of the efforts to modify and ratify union collective bargaining agreements. "It was (I.B.C.’s) inability to close a deal with the I.B.T. (International Brotherhood of Teamsters) that was a significant factor that led to the failure of the Silver Point Plan — which cost (I.B.C.’s) estates over $5 million in non-refundable fees. While the national representatives of (I.B.C.’s) two largest unions may be supportive of the plan term sheet, this is no guarantee that each of the hundreds of local unions will in fact ratify the required modifications to the respective collective bargaining agreements."
A hearing on the motion is set for Oct. 2.