Interstate Bakeries gets court approval for amended disclosure statement; plan confirmation hearing Dec. 5

By Jennifer Lanning Drey

Portland, Ore., Oct. 30 - Interstate Bakeries Corp. obtained approval from the U.S. Bankruptcy Court for the Western District of Missouri for the disclosure statement for its second-amended plan of reorganization, which contemplates the company's new funding commitments, according to a source familiar with the case.

The plan confirmation hearing is scheduled to begin Dec. 5.

As previously reported, the plan is based on an agreement under which a group of investors will invest $44.2 million in cash in the reorganized company in exchange for 17% of the common stock of the reorganized company and will purchase $85.8 million in new fourth-lien convertible secured notes, which will be convertible into 33% of the new common stock.

The investors will also receive series A warrants with a strike price of $12.50 and representing 15% of the new common stock.

Term loan lenders will receive 17% of new common stock, as well as series B warrants with a strike price of $12.50 and series C warrants with a strike price of $10.00.

The plan investors include an affiliate of Ripplewood Holdings LLC and Silver Point Finance, LLC, Monarch Alternative Capital LP and McDonnell Investment Management LLC.

Creditor's trust settlement

Holders of general unsecured claims are not entitled to any recovery under the amended plan; however, after the company's official committee of unsecured creditors objected to the plan, Interstate agreed to establish a creditors' trust upon its emergence from bankruptcy.

The creditors' trust will be funded through a cash payment of $5 million, and costs of administering the trust will be paid from the trust assets, the company previously said.

The creditors' trust will also receive rights to pursue litigation claims at the expense of the trust.

Additionally, the creditors' trust will potentially receive a cash payment upon a future liquidity event with the payment based on the increase, if any, in value of a 3% equity ownership stake in the reorganized company in excess of 150% of the investment equity value paid by the equity investor.

Creditor treatment

Under the proposed amended plan of reorganization:

• Holders of $276,119 of secured tax claims will recover 100% in cash;

• Holders of $310,367 of secured claims will recover 100% either in cash or through the return of the collateral securing the claim;

• Intercompany claims will either be released, waived and discharged on the plan effective date, contributed to the capital of the obligor corporation or remain unimpaired;

• Interests in subsidiary debtors will be unaffected by the plan, except for interests in Brands preferred stock, which will be cancelled;

• Holders of pre-bankruptcy lender claims will receive their share of each component of the pre-bankruptcy lenders' distribution property;

• Holders of capital lease claims will receive either deferred cash payments, return of the capital lease collateral or have their claims reinstated;

• Holders of general unsecured claims will not be entitled to any recovery under the plan;

• Subordinated securities claims will be cancelled; and

• Interests in Interstate Bakeries will be cancelled and holders will receive no distribution under the plan.

Financing details

As previously reported, General Electric Capital Corp. has agreed to structure, arrange and syndicate a $125 million working capital senior secured revolving credit exit facility, and Silver Point Finance and Monarch Master Funding have agreed to structure, arrange and syndicate a $339 million term loan credit facility.

According to the disclosure statement, the company will also enter into a $147.3 million third-priority secured term loan financing facility.

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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