SEC supports official equity holders' committee for Interstate Bakeries

By Jeff Pines

Washington, Nov. 10 - The Securities and Exchange Commission supports an official equity security holders' committee for Interstate Bakeries Corp.

The commission voiced its support for the move in paperwork filed Tuesday with the U.S. Bankruptcy Court for the Western District of Missouri.

The company and the official unsecured creditors' committee are on the record opposing a shareholders' committee.

When Kansas City, Mo.-based Interstate filed for bankruptcy, it listed its total assets as $1.63 billion and its total liabilities as $1.32 billion leaving a book equity value of nearly $305 million, the SEC said.

Last month, non-insider shareholders representing about 48% of the company's shares met to form an ad hoc shareholders' committee.

The members of the committee are QVT Financial LP; Atticus Capital LLC; The Capital Group Cos.; Sagamore Hill Capital Management LP; EagleRock Capital Management LLC; Fidelity Management & Research Co.; Gruss Asset Management LP; Brandes Investment Partners; and, Lampe, Conway & Co. LLC.

They filed a motion requesting an official committee on Nov. 3.

As of Nov. 8, the company's common shares were trading at $4.20 per share and since filing for Chapter 11 the average daily trading volume for Interstate is 2 million shares.

The market value does not guarantee the shareholders will recover anything, but it does show the company is not hopelessly insolvent, which would preclude the appointment of an equity committee, the commission said.

Another reason for appointing a committee, the SEC said, is that the reorganization plan will be heavily negotiated since the company has 32,000 workers, many of whom are unionized, and has $100 million of notes owned by financial institutions, which means they are sophisticated investors.

Management's responsibility is no longer to its shareholders, and creditors have their own interests, leaving no one to fight for the shareholders, the commission said. As for the ad hoc committee, the commission said it is not going to look after the interests of an entire class.

The commission said it would be more practical to form an official committee as soon as possible.

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

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