Interstate Bakeries Readies Its Exit from Bankruptcy Protection
If the reorganization plan is approved as presented, it will mean the cancellation of all public stock in the company.
Interstate Bakeries Corp. reached concession agreements with its two largest unions in November that should prevent the Kansas City, Mo., company from being sold off piecemeal and allow it to exit bankruptcy protection any day now.
A court hearing was scheduled for Dec. 5 at which time a judge could approve the big baker’s bankruptcy reorganization plan and possibly set a date for exit from bankruptcy protection.
The majority of the estimated 8,500 members of the International Brotherhood of Teamsters who work at IBC agreed to salary cuts (estimated at $10 per week for hourly workers and $110 per week for commission employees) and sharing of health insurance costs. A similar agreement apparently was reached with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which has a similar number of members at IBC. Together the two unions represent about 80 percent of IBC employees, according to a company spokesperson.
If the reorganization plan is approved as presented, it will mean the cancellation of all public stock in the company. IBC will be held by private investors, although the unions may get a small share of ownership if the company appreciates.
“IBC Teamsters were faced with a difficult decision, and they voted loud and clear to preserve good American jobs at Interstate,” Jim Hoffa, Teamsters general president, said in a statement carried in the Kansas City Star. “The newly ratified agreement paves the way for the company to exit bankruptcy as a stand-alone entity, which is the best opportunity for our members to keep their jobs.”
Interstate has been under bankruptcy protection since September 2004. If creditors approve its plan of reorganization and other issues can be resolved by the bankruptcy court, Interstate could exit bankruptcy by the end of the year, according to company lawyers cited in the Star.
New union agreements granting the company concessions are a requirement of about $600 million in post-bankruptcy financing underwritten by Ripplewood Holdings, a New York private equity group, and other lenders and investors. But that agreement will expire Feb. 9 if Interstate has not emerged from bankruptcy. If that financing goes away, the company has said, it will have to liquidate.