Interstate Yucaipa plan deadline request denied; judge says company 'must live with' its schedule

By Caroline Salls

Pittsburgh, Dec. 21 - Interstate Bakeries Corp.'s attempt to set a Jan. 3 deadline for the Yucaipa Cos. LLC and the International Brotherhood of Teamsters to file a plan of reorganization was rejected Friday by the U.S. Bankruptcy Court for the Western District of Missouri, with judge Jerry W. Venters saying that the company set the competing plan schedule, "now it must live with it."

According to the motion, because the Teamsters have agreed to negotiate exclusively with Yucaipa on the terms of a proposed alternate to Interstate's Silver Point-funded plan of reorganization, Interstate and other parties have been unable to adhere to deadlines set under court-approved alternative proposal procedures.

If multiple bids are received, an auction will be held on Jan. 22, and the hearing on approval of the highest offer is scheduled for Jan. 29.

The company said it was imperative that the Teamsters and Yucaipa file a plan that details their proposed plan alternative by Jan. 3 to allow the company, its plan investors and other interested parties to meet the proposal deadlines.

In his ruling, Venters said the present schedule for the submission of proposals for the reorganization or sale of the company was set by Interstate.

"For that reason alone, the debtors are in no position to complain about the absence of bids or proposals at this juncture, and they are certainly in no position to demand that potential bidders be put under an expedited and totally unreasonable deadline because of their frustrations with the [Teamsters]," Venters said in his order.

Venters said that, although the Teamsters' strategy of negotiating only with Yucaipa is not in the best interest of all parties involved, the union is entitled to talk to or not talk to any party it wants.

Earlier Yucaipa and the Teamsters objected to the company's attempt to set a deadline, saying Interstate has "pursued a three-year path doomed to failure, and now attempt to pin the blame for that failure on Yucaipa and the Teamsters."

Despite enjoying more than three years of exclusivity, Yucaipa said in its objection filed with the court that the company failed to file a confirmable plan of reorganization, and it obtained approval for financing, incurred millions of dollars in lender fees and agreed to unrealistic financing deadlines when it knew in advance that the condition of Teamster ratification of a new business plan would never be satisfied.

"The debtors deluded themselves and their stakeholders into believing that they could bully the Teamsters into capitulating to accepting concessions to fund the rejected business plan. The debtors were wrong," Yucaipa said in its objection.

"The blame for their manifest errors in strategy is theirs to shoulder alone. They cannot lay that blame at Yucaipa's and the Teamsters' doorstep."

Yucaipa said Interstate is now asking the court to force Yucaipa to accomplish in two weeks, including both the Christmas and New Year's holidays, what the company, its unsecured creditors committee, lenders and equity committee could not do in more than three years.

Yucaipa said it may be the only party capable of reaching a consensual resolution with the Teamsters, but if Yucaipa and the Teamsters cannot meet an arbitrary two-week deadline for plan filing, Yucaipa and the union would be illegally excluded from the plan process.

Meanwhile, according to the Teamsters' objection, it is not logical for Interstate to assume that the union would be able to come up with a plan "from scratch" with another interested party between Jan. 3 and Jan. 29 if the Teamsters cannot even come up with a plan with "trusted ally" Yucaipa in 40 days.

The Teamsters said Yucaipa could most likely come up with a plan by Jan. 29, which is the deadline for all other parties interested in submitting an alternative to Interstate's Silver Point-funded plan.

"It is exactly this likelihood that the debtors' management fears," the Teamsters' objection said.

As a result, the Teamsters said the company's attempt to enforce an artificial deadline for Yucaipa's plan is really an attempt to destroy any competing plan.

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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