Interstate Bakeries asks court to keep shareholder from trying to reconstitute board of directors

By Caroline Salls

Pittsburgh, Nov. 30 - Interstate Bakeries Corp. asked the U.S. Bankruptcy Court for the Western District of Missouri to constitute its board of directors with the nine current directors and to keep shareholder Brencourt Advisors LLC from prosecuting an action in the Delaware Court of Chancery that would force a shareholders meeting to reconstitute the board, according to a Wednesday court filing.

Interstate said Brencourt wants to seize control of the board to improve its leverage in the reorganization process, and, by its own admission, Brencourt acquired much of its interest in the company long after the bankruptcy began.

"Even after obtaining two seats on the board, Brencourt continued to demand total control of the company's board," Interstate said in the motion.

In addition, Interstate said Brencourt wants the shareholders to vote to replace the existing directors with a board of their choosing, "over the express opposition of the secured creditors."

Interstate said Brencourt knows there will be little, if any, value for equity interests in the company's bankruptcy case, and Brencourt hopes seizing control of the board will delay the reorganization process and provide it with the leverage it needs to create some value for equity interests.

"Brencourt has not - and cannot -identify any compelling need to unseat the company's board," Interstate said in the motion.

"It would be disastrous to the [company's] estates for the board's ongoing restructuring initiatives to be disrupted and for these cases to descend into a morass of litigation over the debtors' successes and failures, the value of their assets and their enterprise, adequate protection and similar matters that would inevitably follow the board changes advocated by Brencourt."

According to an 8-K filing with the Securities and Exchange Commission, Interstate believes, based on current financial performance, that it is difficult, if not impossible, to derive a current enterprise value for the company that would result in value for the equity interests after first taking creditor claims into consideration.

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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