Interstate Bakeries considering plan investment, asset sale; Silver Point commitment expected to expire

By Caroline Salls

Pittsburgh, March 7 - Interstate Bakeries Corp. said it is in talks regarding possible changes to its plan of reorganization that would allow the company to emerge from Chapter 11 bankruptcy as a stand-alone company, including a potential financial investment proposal that includes labor concessions agreeable to the International Brotherhood of Teamsters.

Interstate said it has also begun the process required for the possible sale of some or all of its businesses and assets.

If it is not able to confirm a stand-alone plan of reorganization, Interstate said it believes that a sale of the company is the best alternative to maximize the recovery to stakeholders.

"Under the circumstances, the only prudent course of action for the company is to embark on a dual path and explore alternatives that include the sale of the company in multiple transactions," chief executive officer Craig Jung said in the release.

"As part of this process, we will immediately begin holding discussions with potential strategic purchasers, many of whom have already expressed interest in buying certain of the company's businesses and assets."

To allow the investment proposal talks to continue, the company said it has asked the U.S. Bankruptcy Court for the Western District of Missouri to postpone its plan confirmation hearing to April 23 from March 12, meaning Silver Point Finance, LLC's up to $400 million exit financing commitment will expire on March 14.

Under the Silver Point financing commitment, Interstate was required to obtain confirmation of its plan of reorganization by March 14.

Interstate said it plans to continue discussions with Silver Point, as well as other parties, in an attempt to obtain a replacement exit financing commitment for a stand-alone plan.

According to the release, a financial investor previously expressed interest in making an equity investment in the company, and the potential investor submitted a proposal last week. The union said it would agree to the proposal if the financial investor becomes an investor in Interstate.

The company said it is reviewing the proposed labor concessions negotiated between the investor and the Teamsters, and it is looking forward to receiving a more detailed term sheet for consideration by Interstate's board of directors.

"We are pleased with the interest financial investors have shown in our company," Jung said in the release.

"We remain hopeful that, working together with all our constituents, we will be able to quickly achieve modifications to our plan of reorganization, or receive an alternative plan of reorganization that will allow IBC to maximize constituent recoveries and emerge from Chapter 11 well positioned to compete in the marketplace and build capability and competitive advantage."

In addition, Interstate said it is in discussions with its debtor-in-possession facility administrative agent JPMorgan Chase Bank, NA to extend the DIP facility maturity date and increase the size of the loan to give the company enough time and liquidity to support its business operations as it explores its alternatives.

The DIP facility is set to mature on June 2, 2008.

Interstate, a Kansas City, Mo., bakery operator, filed for bankruptcy on Sept. 22, 2004. Its Chapter 11 case number is 04-45814.

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