IBC: says it might liquidate without union concessions

Kansas City / MO. (ibc) Interstate Bakeries Corporation (IBC) filed a motion with the U.S. Bankruptcy Court requesting an extension of its exclusive period in which to file a plan of reorganization through January 15, 2008 and its exclusive period to solicit acceptances of any plan of reorganization through March 15, 2008. The current exclusivity periods are scheduled to expire October 05, 2007 and December 05, 2007, respectively.

IBC has contacted more than 50 potential investors and has received significant interest to fund the company´s business plan that will provide IBC with sufficient liquidity to continue operations, position it for future success and maximize value of the bankruptcy estates. There can be no assurance, however, that the necessary financing to fund the plan will be provided to the Company on acceptable terms or at all.

The request to extend exclusivity is predicated on achieving agreements with the company´s two principal unions by September 30, 2007. In addition, the indications of interest for the financing of the business plan that have been received mandate that such agreements have been reached. The proposed modifications to existing collective bargaining agreements call for union alignment to a more capable and more cost-effective Path-to-Market, specific health and welfare concessions, and increased work rule flexibility. IBC´s two principal labor unions are the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) and the International Brotherhood of Teamsters (IBT). If such agreements are not reached, the company, in the same motion, has alternatively asked the court for interim approval of a 30-day extension from the existing deadline to file a plan of reorganization and a 30-day extension from the existing deadline to solicit acceptances in order to allow sufficient time to formulate a rational strategy for maximizing value of the bankruptcy estates, including a sale of the Company and/or its assets in its entirety or in a series of transactions.

«Time is of the essence», according to the filing. The Company´s debtor-in-possession financing agreement is currently scheduled to expire on February 09, 2008. IBC does not expect the financing agreement will be extended unless its emergence from Chapter 11 protection is imminent. Additionally, the company believes that it will be extremely difficult in the current market environment to find alternative debtor-in-possession financing, making the financing of the company´s business plan and achievement of agreements with its two principal labor unions even more critical to IBC´s ability to survive.

The Company said it plans to transition its decades-old, high-cost «one-size-fits-all» traditional route delivery structure to an advanced Path-to-Market structure it believes creates better jobs for sales employees and will significantly drive selling and delivery productivity.

To effect the change, however, the Company said it requires flexibility to meet constantly changing market demands. «Currently, IBC is hindered by work rules under its collective bargaining agreements that prohibitively restrict how it can operate its business», IBC said in its filing. «These agreements must be modified for the business plan to be implemented».

The Company has made significant progress with the BCTGM on finding solutions to the challenges it is facing, including Path-to-Market and cost structure issues, but discussions with the IBT «have not been fruitful», Interstate Bakeries said in court documents.

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