IBC Emerges from Bankruptcy

February 9, 2009: Interstate Bakeries Corp. Feb. 3 emerged from bankruptcy under Chapter 11 after having reached revised labor agreements with the 423 union locals representing the company's unionized workforce (In re Interstate Bakeries Corp., Bankr. W.D. Mo., No. 04-45814-JWV, confirmation effective 2/3/09).

The International Brotherhood of Teamsters, which together with the Bakery, Confectionery, Tobacco Workers, and Grain Millers represent 90 percent of IBC's union-represented workers, issued a statement Feb. 3 praising the unions' role in enabling IBC to operate on its own as a private company.

“Today is a great day for the 23,000 employees of Interstate Brands Corp. [a subsidiary of Interstate Bakeries]. The Teamsters Union fought hard to save good-paying jobs at the company. I am proud of the battle we waged for 41/2 years to see this company survive,” Richard Volpe, director of the Teamsters Bakery and Laundry Conference, said in the statement.

A federal bankruptcy court Dec. 5 affirmed that the company had met all the statutory requirements for its proposed reorganization plan after BCTW locals voted Dec. 4 in favor of the modification agreement covering about 7,000 IBC employees (239 DLR A-10, 12/12/08). The agreement is similar to the agreement approved in November by IBT members (220 DLR A-10, 11/14/08) to reduce wages and benefits when IBC exits bankruptcy.

Modification of the collective bargaining agreements are a condition of the plan funding commitments.

Union Role Seen as Essential

Acknowledging the importance of the unions' concessions, Craig Jung, IBC chief executive officer, said in the statement, “I want to thank IBC's employees for the sacrifices they have made and our union leaders for their commitment to our company and saving jobs. Their actions made possible the financing required to execute a business plan that will build competitive advantage and secure our company's future.”

“The cooperation between the company and unions involved in this bankruptcy was absolutely necessary to keep this company afloat,” BCTW President Frank Hurt told BNA in December. “We hope that coming out of bankruptcy the company will be successful and profitable far into the future.”

In August, the Teamsters brokered a deal between the investment firm Ripplewood Holdings and IBC's creditors to shield the bankrupt company from liquidation (166 DLR A-5, 8/27/08). Ripplewood will take a 50 percent equity stake in the reorganized company.

Before bankruptcy, IBC operated 53 bakeries in the United States and employed about 32,000 workers. IBC now operates 41 bakeries, 600 distribution centers, and 900 bakery outlet stores at various locations around the country and employs about 22,000 workers.

During the year and a half after Interstate filed for bankruptcy, the parties negotiated five-year, long-term extension agreements that will be folded into the new modification agreement as they expire mostly in 2010 and 2011. The modification agreement expires in July 2014.

When employees' long-term extension contracts expire, beginning in August 2010, hourly employees will receive wage increases each year through the term of the master extension agreement.

In addition, all employees will receive a percentage of IBC's total equity. The company also will establish an employee profit-sharing plan.

By Susan R. Hobbs

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