advertisement

Twinkie maker cleared to exit bankruptcy

Friday, December 5, 2008 | 6:41 p.m. CST

KANSAS CITY — A bankruptcy judge on Friday approved a reorganization plan for Interstate Bakeries Corp., clearing the way for the maker of Hostess Twinkies and Wonder Bread to exit more than four years of bankruptcy.

The Kansas City-based company still must solidify several parts of its post-bankruptcy financing, including completing terms for new asset loans and letters of credit.

But company officials said they were further along in negotiations than they had expected and were hopeful they would officially exit by Dec. 15.

"We're delighted with today's decision, and we're moving toward a positive ending," said Chief Executive Officer Craig Jung. "Twenty two thousand jobs are moving toward being saved, and that's different from what you've typically been seeing in the newspapers (about other companies)."

Should the company not meet the Dec. 15 deadline, the company's next target is Jan. 12, Jung said. The agreements providing the exit financing expire Feb. 9.

Under the plan, a group of lenders will provide a $339 million loan to Interstate Bakeries, while General Electric Credit Corp. would provide a $125 million revolving loan.

Investment firm Ripplewood Holdings will invest $44.2 million in cash and $85.8 million in convertible debt in exchange for a 50 percent stake in the new company and an opportunity to later acquire another 15 percent.

A group of lenders who hold $451 million in Interstate Bakeries' pre-petition secured debt will exchange that for $147.3 million in notes and $85.8 million in debt that can be exchanged for shares in the reorganized company.

Unsecured creditors, who are owed almost $323 million, would receive nothing under the plan. However, they have worked out a compromise under which Interstate Bakeries will pay $890,000 of the creditors' expenses and set aside $5 million in cash to a trust for them.

The company plans to cancel all existing shares and become a private business.

Speaking before U.S. Bankruptcy Judge Jerry Venters, company attorney Eric Ivester noted Interstate Bakeries filed for Chapter 11 protection in September 2004.

"It's roughly been 1,513 days since I first stood before you," Ivester said. "Nobody wanted it to last this long, but at long last we are here before you."

Initially seeking bankruptcy protection because of low sales and high fixed costs, the company spent the intervening years slashing where it could, closing about a dozen bakeries, eliminating 7,000 jobs and shuttering numerous distribution depots and thrift stores.

The company in early 2007 hired Jung, who had 20 years of experience in the snack food industry, including stints with Frito Lay and Pepsi.

Jung on Friday said he looked forward to improving the company's competitiveness and productivity, saying getting away from Chapter 11 protection and its many restrictions will give Interstate Bakeries greater flexibility.

For example, he said the company would be better able to deal with volatile prices for wheat, corn, sugar and fuel, which have lost the company money most of this year. He also said the company will introduce new products and marketing next year, and he believes employees will be able to do their jobs better without the specter of liquidation over their heads.

"We look forward to letting our people get back to what they know and love to do," he said.

A previous reorganization plan fell through this spring after Interstate Bakeries was unable to gain workplace and welfare concessions from the International Brotherhood of Teamsters. That plan called for Silver Point Finance LLC to provide $400 million in post-bankruptcy financing.

But the Teamsters, which represent about 9,500 of the company's employees, are now on board and Ivester said the majority of the company's 400 bargaining units have approved concessions tied to the new agreement. While employees will see wage cuts and health care increases, the company will offer them profit sharing and stock appreciation rights.

They will also help test a new distribution system aimed at cutting costs and improving service to customers.

Ivester said remaining creditors "overwhelmingly" voted in favor of the plan, and he and the other attorneys were able to deal with almost two dozen last-minute objections to allow the plan to go forward.

He stressed to Venters that if negotiations on the financing fall through, the company would likely have to return to court. However, "I think all of the counsel ... are optimistic that that issue will be resolved," he said.

Venters said he, too, was optimistic and congratulated the company on working toward saving so many jobs.

"It's the end of a long, hard road for the debtor and I'm happy to see you propose a plan and secure financing during a very difficult time in our economy," he said. "I hope it works."


Like what you see here? Become a member.


Show Me the Errors (What's this?)

Report corrections or additions here. Leave comments below here.

You must be logged in to participate in the Show Me the Errors contest.


Comments

Ray Shapiro December 6, 2008 | 12:27 a.m.

Columbia gets $400,000 to help obese kids and we're worried about Twinkies and Wonder Bread! Well, I guess people have to work and people have to eat...
Recipe for "Twinkie Sandwiches"
Needed: One loaf of Wonder Bread/One box of Twinkies
Instructions: 1. Deal out half of the loaf of Wonder Bread 2. Place a Twinkie on each slice. 3. Cover Twinkie with a slice of Wonder Bread. 4. Squash carefully. (Mayo and pickles are optional)
-Just wanted to make sure that the college students learn how to prepare a healthy meal.

(Report Comment)

Leave a comment

Speak up and join the conversation! Make sure to follow the guidelines outlined below and register with our site. You must be logged in to comment. (Our full comment policy is here.)

  • Don't use obscene, profane or vulgar language.
  • Don't use language that makes personal attacks on fellow commenters or discriminates based on race, religion, gender or ethnicity.
  • Use your real first and last name when registering on the website. It will be published with every comment. (Read why we ask for that here.)
  • Don’t solicit or promote businesses.

We are not able to monitor every comment that comes through. If you see something objectionable, please click the "Report comment" link.

You must be logged in to comment.

Forget your password?

Don't have an account? Register here.

advertisements