Interstate Bakeries files plan based on Silver Point exit financing commitment

By Caroline Salls

Pittsburgh, Nov. 6 - Interstate Bakeries Corp. filed its plan of reorganization and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the Western District of Missouri, with Silver Point Finance, LLC's $400 million exit financing commitment serving as the cornerstone of the plan, according to a company news release.

The company said it has also obtained plan funding and agreements from JPMorgan Chase Bank, NA, McDonnell Investment Management LLC, Quadrangle Master Fund Ltd. and Silver Point Capital, LP.

In addition, several additional holders of the company's pre-bankruptcy senior secured credit facility have also signed the plan funding agreements, meaning holders of about 95% of the company's pre-bankruptcy senior secured credit facility now support the plan funding agreements.

Interstate said it will seek court approval of the financing and plan support agreements on Nov. 7, but it will not proceed with its motion to extend its exclusive right to file a plan of reorganization.

Still, no third parties can file a competing plan of reorganization before Jan. 7, according to the release.

"The company believes that the reorganization plan it has filed today provides substantial value to its creditors," chief executive officer Craig Jung said in the release.

"We believe strongly that our reorganization plan is the best alternative to maximize value for our constituents in the bankruptcy process, build competitive advantage, and secure the jobs of IBC employees.

"It is based on our business plan, which has been endorsed by everyone who will be involved in its implementation going forward - except for the Teamsters."

Interstate said it has been actively seeking higher and better offers to the proposed financing and plan support agreements and has received interest from multiple parties regarding the opportunity to invest in the company.

However, the company said all of the financing proposals it has received to date require it to reach mutually acceptable agreements on modifications to collective bargaining agreements with its two principal unions, the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union and the International Brotherhood of Teamsters.

As previously announced, Interstate has yet to reach a contract agreement with the Teamsters.

Other offers still welcome

"In light of our inability thus far to reach a mutually acceptable agreement with the Teamsters and our ability to obtain a substantial financing commitment despite an increasingly challenging capital markets environment, the time is right to invite all potential investors to come forward with their own alternative proposals," Jung said in the release.

"To allow for the fullest range of competing offers, the company will permit potential investors to freely discuss proposals with other parties, including the unions, subject to appropriate confidentiality restrictions.

"We believe that any alternative proposal should provide even more value for constituents and equal or better job security for all employees in order to be acceptable to the company and its constituents."

Jung did say in the release that the company would review the details of the plan proposal made Friday by the Teamsters, in conjunction with Yucaipa Cos., "if Yucaipa or anyone else has a better idea about how to help this company emerge from Chapter 11, secure jobs and maximize value for creditors."

Interstate said no specific proposal had been made beyond Yucaipa's request for time to explore a potential alternative plan of reorganization.

Under the terms of the Interstate's Silver Point-funded plan:

• $450 million in pre-bankruptcy funded debt would be exchanged for $250 million in second-lien notes due March 2013, $165 million of 8% convertible secured notes due March 2018 and $35 million of class A common stock;

• Holders of general unsecured claims would receive 25.9% of the outstanding shares of common stock of reorganized Interstate, in the form of class B common stock, as well as the opportunity to participate in a rights offering for an additional $50 million of class B common stock;

• The existing common stock of the company would be cancelled and existing shareholders would not receive any distribution; and

• Reorganized Interstate would obtain up to $400 million in exit financing from Silver Point. As previously reported, the exit facility consists of a $120 million five-year revolver priced at Libor plus 425 basis points, a $60 million four-year term loan priced at Libor plus 450 bps and a $220 million five-year letter-of-credit facility priced at Libor plus 425 bps.

Plan creditor treatment

Specifically, treatment of creditors under the plan will include:

• Holders of secured tax claims, other priority claims will recover 100% in cash;

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

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

• Holders of convenience claims will receive either 100% payment in cash if the claim is for less than $1,500, or will receive $1,500 in cash if the claim exceeds this amount;

• 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 new junior secured notes, new convertible secured notes and class A common stock;

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

• Holders of old convertible note claims and general unsecured claims will receive their share of class B common stock, the option to participate in the rights offering and a share of trust recoveries made available for distribution to beneficiaries of the Interstate creditors trust; and

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

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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