Time running out for bankrupt Twinkie-maker bailout

Time running out for bankrupt Twinkie-maker bailout The three-year bankruptcy saga of Interstate Bakeries Corp., maker of products such as Twinkies, Hostess snack cakes, and Wonder Bread, continues unabated.
   As a Nov. 7 bankruptcy court-ordered deadline to resolve ongoing labor disputes with union employees inches closer, the clock is also ticking down for the beleaguered Kansas City, Kan.-based Interstate to take advantage of a $400 million bailout by investors.
   On Monday, Interstate said it had negotiated a $400 million bailout deal with JP Morgan Chase Bank, McDonnell Investment Management LLC, Quadrangle Master Fund Ltd., and Silver Point Capital L.C. Under terms of deal, J.P. Morgan would convert about $218 million of pre-bankruptcy debt into new debt and equity securities to be issued when the firm emerges from bankruptcy, subject to certain conditions.
   Interstate said that labor concessions must be obtained to fulfill requirements of bailout commitments from the investment groups, which hold nearly 48 percent of Interstate's funded amounts outstanding prior to the 2004 bankruptcy filing.
   A federal bankruptcy court judge has given the firm until Nov. 7 to conclude its labor negotiations and return to the court with a plan to emerge from bankruptcy.
   This might be easier said than done for the embattled baker.
   Interstate has been locked in contentious negotiations with both the International Brotherhood of Teamsters and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union for since late summer.
   In late September, the baker's union broke off negotiations with IBC, joining the Teamsters who had left the bargaining table a week earlier threatening a Southern California strike. The two unions, which represent about 20,000 of the firm's 25,000-strong workforce, had agreed to some wage and benefit cuts to help Interstate pull out of bankruptcy. However, both unions said at the time that Interstate's demands were unreasonable.
   Interstate's union workers have reportedly already agreed to a 4 percent pay cut and wage freeze, and the union claims that Interstate negotiators are asking for a 25 percent wage cut for about half of the Teamster workers and additional worker contributions for health care.
   The bakery firm told Kansas City media last month that the firm is seeking $20 million in health care contributions from its union employees and acknowledged that about 20 percent of the firm's union workers would see wage reductions under its contract proposal.
   Following the breakdown of negotiations, Interstate warned the two unions at the time that if they did not agree to labor concessions by the end of September, the firm could lose potential bailout funds and be forced to liquidate. Interstate did not clarify if the bailout deal announced Monday was the same deal originally threatened by the Sept. 30 deadline.
   On Oct. 16, the Teamsters warned the Interstate board in a letter made public Friday by the union that Interstate's management decisions were 'misguided and dangerous.
   'We urge you, on behalf of the dedicated Teamster workers at IBC, to examine closely the performance of your current management team,' said Rich Volpe, head of the Teamster’s bakery and laundry conference. 'Their short-sightedness, misguided and risky operational decisions and failure to act in the best interest of IBC’s shareholders, workers and customers threaten the very future of this company.'
   In the letter, Volpe accused Interstate Chief Executive Craig Jung of 'pursuing a slash-and-burn labor relations policy,' and ignoring the concessions union members have already made. The union estimates that member concessions have already saved the firm $16 million a year.
   The Interstate board responded with a vote of full confidence in not only Jung and the Interstate management team, but also the direction being taken by them to obtain further concessions from the unions.
   'We are disappointed that the Teamsters continue to try to divert discussion away from the bargaining table,' the company said in its written statement. 'Their irresponsible behavior will not help IBC survive or save the jobs of our employees and their members.'
   While industry experts believe that the Twinkie and Hostess products will survive with or without Interstate, the Wonder Bread label, a staple of children's lunch boxes for nearly 80 years, might be another story. At the end of August, Interstate said it would eliminate the Wonder Bread brand from Southern California shelves, close four Southern California production facilities and layoff nearly 1,300 local workers. According to Hoover's, the firm has 45 commercial bakeries, 650 distribution centers and 800 bakery outlets across the country which are expected to pull in about $2.9 billion in sales this year.