Interstate Bakeries' ad hoc equity committee opposes success fee for Alvarez & Marsal

By Jeff Pines

Washington, Oct. 18 - Interstate Bakeries Corp.'s ad hoc committee of equity securities holders objected to Alvarez & Marsal LLC getting a 5% success fee, saying the criteria are too vague to justify the fee.

Interstate hired Alvarez & Marsal LLC to help turn the company around, and Antonio Alvarez II is now working as the company's chief executive officer.

The six-member ad hoc committee, which includes Fidelity Management & Research Co., The Capital Group Cos., Brandes Investment Partners, and others, controls about 48% of Interstate's common stock. The committee filed its objection Monday with the U.S. Bankruptcy Court for the Western District of Missouri.

According to the Kansas City, Mo.-based company's agreement with Alvarez & Marsal, the restructuring firm is entitled to a 5% success fee based on value created, which will be at least $3.85 million, unless there is a liquidation. The problem for the committee is that there is no clear definition of what "value created" is, it said.

As for the $3.85 million, "a guaranteed minimum is not an incentive," the committee said.

The agreement calls for the term to be defined within 90 days of the engagement letter.

It believes any decision on a success fee should be discussed at the end of the case. Another issue for the committee is that Alvarez & Marsal executives are working as Interstate officers. The firm should not get a bonus for work its executives are already being paid to do for Interstate, the committee said.

Interstate filed for bankruptcy on Sept. 22. Its Chapter 11 case number is 04-45814.

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