Ripplewood buying shares at 12.50? What does this mean for shareholders? 4-Oct-08 10:26 pm sOct 04, 2008 (The Kansas City Star - McClatchy-Tribune Information Services via COMTEX) -- IBC | Quote | Chart | News | PowerRating -- Interstate Bakeries Corp. received court approval Friday to arrange delivery of some bread.
U.S. Bankruptcy Judge Jerry Venters gave the wholesale baking company permission to commit to nearly $600 million in financing agreements that will allow Interstate to finally emerge from more than four years of bankruptcy. The arrangements also will give a New York investment fund majority ownership in the newly restructured company.
But in tacking down the financial commitments, Interstate had to agree to chip in something for its unsecured creditors, who had been slated to get nothing under the reorganization.
Ripplewood Holdings has agreed to invest $130 million in Interstate, consisting of $44.2 million in cash and $85.8 million in convertible debt. In exchange, it will receive a 50 percent equity stake in the reorganized company. It also will get warrants to acquire an additional 15 percent stake at a price of $12.50 a share.
In addition, Silver Point Capital LP and three other lenders that together hold about $450 million, or 53 percent, of IBC's pre-petition secured debt have agreed to swap that for $147.3 million in notes and $85.8 million in debt. The debt would be convertible to a 33 percent stake in the new company.
The lenders also have agreed to a $339 million loan to help finance Interstate's exit from bankruptcy. That would supplement a $125 million revolving loan from General Electric Credit Corp. to further finance Interstate once it emerges from the protection of the bankruptcy court.
In exchange for the agreement to invest, Interstate would pay Ripplewood $6.5 million in fees and up to $6 million in expenses. The lenders on the $339 million loan would collect $16.5 million in fees. About $3.2 million of those fees will be due if the court approves the equity portion of the financing arrangement. A hearing on that is set for Oct. 22.
In its court filing, Interstate, which makes such iconic brands as Wonder Bread and Hostess Twinkies, called the financing agreement "a watershed moment" for the company and its 22,000 employees. Once the largest wholesale bread baker in the United States, it has closed more than a dozen bakeries and eliminated 10,000 jobs since falling into bankruptcy four years ago.
But to finally reach that watershed moment Friday, Interstate decided it was going to have to give if it expected to get.
Venters' approval came after Interstate and Ripplewood worked out a last-minute agreement with unsecured creditors, who are owed about $190 million.
The unsecured creditors tried to put up a roadblock to the financing agreement with a motion filed Monday. Its lawyers objected to the baking company's "absolute" commitment to pay Ripplewood millions of dollars in fees, while Ripplewood could pull out of the deal if Interstate's financial condition changed "materially."
IBC responded that the fees were appropriate and contended that "the objection should be viewed for what it is -- an effort to create leverage to get a settlement that provides some recovery to unsecured creditors."
And in that regard, the unsecured creditors' strategy worked.
Without providing details, lawyers for Interstate said it and Ripplewood agreed to give the unsecured creditors some cash and pay up to $890,000 in their expenses, plus other considerations.
In exchange, the unsecured creditors dropped their objection to the financing commitment and agreed to support the baking company's reorganization.
