KANSAS CITY, Missouri (Reuters) - A U.S. bankruptcy judge on Wednesday gave Interstate Bakeries Corp IBCIQ.PK a final 30 days to settle differences with a key union and come up with a plan to begin bringing the maker of Wonder bread and Twinkies snacks out of bankruptcy.
IBC, one of the largest U.S. commercial bakers and distributors of fresh-baked bread and sweet goods, said it has identified at least three potential investors that could help save the company from liquidation, but it must reach agreement with the International Brotherhood of Teamsters on certain issues first.
Teamsters attorney Frederick Perillo said there was little chance the union could reach an agreement with IBC and argued in court that the union should be allowed to talk directly with potential investors immediately. The court should not extend IBC’s “exclusivity” window in which parties talking with the bread company are barred from holding separate talks with the unions, Perillo said.
“We believe the only way is to open up the process so everyone can talk to everyone,” Perillo said. “There are parties ... willing to engage in that type of constructive dialogue.”
One of those parties spoke up in court on Wednesday. Yucaipa Cos. LLC, a Los Angeles-based firm run by billionaire Ronald Burkle, said it was among the investors interested in Interstate. Yucaipa’s Robert Klyman told the court the company wanted to be able to negotiate directly with the Teamsters.
Perillo said the Teamsters feared IBC would use the next month to sell off key assets, endangering more jobs. IBC’s move to exit the Southern California bread market, which is expected to result in the loss of 1,300 jobs, would make it harder for unions to work out an agreement with the company, he added.
Earlier on Wednesday, IBC received court approval to proceed with its previously announced plan to close down its bread operations in Southern California.
U.S. bankruptcy judge Jerry Venters approved the company’s plan to shutter four bakeries, about 10 percent of IBC’s bakeries, numerous retail outlets and 18 distribution centers in the region. The operations are slated to end October 20.
IBC controls about 12 percent of the Southern California market, but it has seen its share and profits erode in recent years. The bread division lost more than $13 million in fiscal 2007 in that market, according to the company.
“The profitability had deteriorated significantly,” IBC President Michael Kafoure testified. “We took every action we knew to take to try to save the marketplace.”
The company blamed stiff competition from Sara Lee SLE.N and others for its slide.
IBC officials said they hope to emerge from bankruptcy as a stand-alone company. But the company will use the next 30 days to “pursue all other alternatives ... including a potential sale of the company in its entirety or in a series of transactions,” company officials said.
Judge Venters told IBC, which filed for bankruptcy in 2004, that this was its last chance to formulate a plan to stay afloat as he extended the exclusive period for IBC to file a plan of reorganization to November 8.
“I hope everybody will lay their weapons down and give this thing a fair shot,” he said. “This is going to be the last 30 days.”