US baked goods group Interstate Bakeries Corp. (IBC) has been given a further 30 days to reach a deal with unions that would allow the company to lodge its recovery plan with a bankruptcy court.
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IBC has been given until 8 November to file a reorganisation plan and was also given until 7 January to solicit acceptances. A US bankruptcy court also granted IBC permission to exit the bread market in Southern California by 20 October, as planned.
The IBC recovery plan is contingent on it reaching an agreement on the plan its unions. It reached an agreement with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union last week but has so far not been able to reach a similar accord with the Teamsters.
IBC told the court that it still believes the best way of maximising value for all of its stakeholders is to emerge from bankruptcy as a stand-alone company. However, IBC said that to meet its fiduciary responsibility to all of its constituents, it “had determined it necessary to use this 30-day period to pursue all other alternatives for maximising the value of its bankruptcy estates, including a potential sale of the company in its entirety or in a series of transactions”.
CEO Craig Jung put the onus on the union to back the recovery plans. “We continue to believe the best alternative for saving 25,000 IBC jobs and meeting our fiduciary responsibility for maximising recovery for our creditors is to reach a mutually acceptable agreement with the Teamsters that enables rational financing to fund our business plan,” he said. “However, time is running out. Our current debtor-in-possession financing agreement expires on 9 February, 2008. Bottom line, if the Teamsters want to help save our company and its members’ jobs, they need to move quickly.”
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By GlobalDataJung added: “While we negotiated hard to win critical modifications to our collective bargaining agreements that would have created sustainable competitive advantage and, at the same time, provided good jobs at good pay to our employees, our focus now must be on maximising value of the bankruptcy estate, recognising that other alternatives may not protect our employees’ jobs or benefits.”
However, Teamsters attorney Frederick Perillo said there was little chance of the union reaching an agreement with IBC, and told the court that the union should be allowed to talk directly with potential investors.
Bankruptcy judge Jerry Venters warned that this would be the final extension and that the two parties should strive to agree a way forward. “I hope everybody will lay their weapons down and give this thing a fair shot,” the judge said, according to reports in the US. “This is going to be the last 30 days.”
The agreement that IBC reached with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union last week is being voted on for ratification by the local unions across the country.
Meanwhile, the court approved IBC’s previously announced plans to close down its bread operations in Southern California, which will involve shutting four bakeries, about 10% of the company’s production, numerous retail outlets and 18 distribution centres in the region. The units are scheduled to cease operation on 20 October.
IBC, which filed for bankruptcy in 2004, has about 12% of the Southern California bread market, but had been trading at a loss in the region, in the face of stiff competition.
