Interstate looks to extend DIP, exclusive periods

New York, Aug. 2 - Interstate Bakeries Corp. said it has asked the U.S. Bankruptcy Court for the Western District of Missouri to extend its debtor-in-possession financing facility and its exclusive periods.

The motion requesting more time for the DIP facility will extend the maturity of the $200 million loan to June 2, 2007 from Sept. 22, 2006.

Interstate noted that the new termination date will match the end of its 2007 fiscal year.

JPMorgan Chase Bank will stay on board as agent and will syndicate the extended financing facility.

"We are pleased to have reached agreement with JPM Chase regarding the extension and believe the proposed terms provide us with the liquidity necessary to complete our Chapter 11 restructuring," Tony Alvarez, chief executive of Interstate and co-founder and co-chief executive of advisory firm Alvarez & Marsal, said in a news release.

"The improvement in financial performance has taken longer to complete principally due to intense competitive pressures and significantly higher ingredient costs, particularly flour and sugar, and energy costs negatively impacting our fiscal 2006 performance.

"We believe fiscal 2007 will be a transitional year for the company during which the operational, financial and marketing initiatives we have implemented during our restructuring will begin to impact our results."

In a separate motion, Interstate asked to extend its exclusive period to file a plan of reorganization to Jan. 31, 2007 from Sept. 22, 2006 and its exclusive period to solicit votes to April 2, 2007 from Nov. 21, 2006.

Interstate said the additional time will allow it to complete a valuation analysis and explore exit financing alternatives necessary to develop its plan of reorganization.

It will also give time to complete the remaining restructuring efforts, principally the on-going negotiations with its union-represented employees.

In addition, Interstate announced it will start a search for a permanent chief executive officer. The company's board also intends to review candidates to fill two vacancies.

The company is reviewing candidates for the board suggested by the official committee of equity security holders and those submitted directly by stockholder Brencourt Advisors, LLC.

The extended DIP will release more cash to Interstate by allowing it to use for general corporate purposes 50% of the restricted cash previously unavailable, with the remaining 50% going to partially repay senior secured pre-petition loans. As of Wednesday, there was $88 million of restricted cash.

As of July 1, the end of the first quarter of fiscal 2007, Interstate had $74.5 million of unrestricted cash and $86.5 million of restricted cash. To date, Interstate has not borrowed under its $200 million DIP facility, although it has issued letters of credit and as of July 1 there were $105.8 million outstanding.

A hearing on both motions is scheduled for Aug. 23.

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

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