Interstate DIP availability cut $10 million; company must file plan or obtain exit financing to restore

By Caroline Salls

Pittsburgh, Oct. 3 - Interstate Bakeries Corp. amended its debtor-in-possession facility, reducing the total availability by $10 million until the company files a plan of reorganization or secures exit financing, according to an 8-K filed with the Securities and Exchange Commission.

Specifically, the amendment negotiated with DIP lender JPMorgan Chase Bank changes the borrowing base formula, which reduces the amount available to the company under the DIP by $10 million.

However, that $10 million availability will be restored when the court approves a disclosure statement for a plan of reorganization that repays the DIP in full or when Interstate receives a binding commitment for exit financing.

If the company has not reached an agreement-in-principle on new collective bargaining agreements with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union and the International Brotherhood of Teamsters by Dec. 1, the amendment adds a covenant requiring Interstate to deliver a revised plan to JPMorgan by that date detailing how it plans to maximize the value of its estates, including any plans for an asset sale.

According to the 8-K, the union agreements must "provide for union alignment to a more capable and more cost-effective path-to-market, certain health and welfare concessions and increased work rule flexibility."

In addition, the DIP amendment allows the company to incur up to $23 million in cash restructuring charges, which will be incurred in connection with the Southern California market consolidation.

The Kansas City, Mo., bakery operator filed for bankruptcy on Sept. 22, 2004 in the U.S. Bankruptcy Court for the Western District of Missouri. Its Chapter 11 case number is 04-45814.

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