Twinkie-maker, Teamsters get 30 more days to reach pact

KANSAS CITY, Mo. -- A bankruptcy judge on Wednesday gave Interstate Bakeries Corp. and its largest union 30 more days to either work out their differences or develop plans for the company's future, including a possible sale.

U.S. Bankruptcy Judge Jerry Venters granted a request from the Kansas City-based maker of Hostess Twinkies and Wonder bread to extend the Friday deadline for filing its reorganization plan to Nov. 7.

Attorneys for Interstate Bakeries, which filed for Chapter 11 protection in September 2004, had wanted to extend the deadline to Jan. 15 to develop a plan for exiting bankruptcy. But they asked for a shorter period Wednesday after being unable to reach an agreement with the company's largest union, the Teamsters, over health and welfare concessions and a proposed revamping of the company's distribution system.

They said they would use the time reviewing options that would maximize value for the company's creditors, including a sale of the company as a whole or in parts.

Venters, who had said earlier this year he wouldn't approve further extensions in the case, urged the two sides to resolve their stalemate before the Nov. 7 deadline.

"We've been here three years and a few days on this case and another 30 days won't hurt a whole lot," Venters said. "I hope everybody will lay their weapons down and give this thing a shot."

Frederick Perillo, an attorney for the Teamsters, said he wasn't optimistic about an agreement and that Venters should remove conditions requiring potential investors to sign confidentiality agreements preventing them from negotiating directly with the union.

"To avoid the liquidation of this company we believe the only way is to open up the process so everyone can talk to everyone," Perillo said.

Venters also on Wednesday approved Interstate Bakeries' plan to pull out of the Southern California bread market at the end of the month, which would involve closing four bakeries and eliminating 1,300 jobs.

Witnesses for the company told Venters that the move was necessary as a decline in demand for white bread and increased competition has led the division to lose money for the past two years, including $10.3 million last year. The company will continue to sell snack cakes, which have still been profitable.

The Teamsters opposed that strategy, saying the company hadn't given the union enough notice and couldn't be sure it wouldn't lead to customer backlash elsewhere.

Venters said he was sympathetic but determined it was a sound business move.

"I realize this has an impact on many of your union members and employees," he told Perillo. "Unfortunately, it's a fact of life as well."

In court filings, Interstate Bakeries said it had received interest from a number of parties willing to invest in the company once it got out of bankruptcy. But those agreements hinged on the company being able to get its top two unions to agree to a number of concessions.

The company was able to reach a tentative agreement last week with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which is currently having its roughly 9,000 members vote on the new contract.

But the company has not been able to come to terms with the Teamsters, which represents about 10,000 employees. The union has objected to the concessions, as well as Interstate Bakeries' plan to redesign its product distribution system.

The union says that change, which would separate the job functions of many drivers who currently sell and deliver the company's products, would reduce the pay for many of its members.

It asked Venters to reject the company's request for an extension, saying three years was more than enough time to develop a plan and he should allow other players a chance to propose their own plans for the company's future.

One of those is Yucaipa, an investment company led by Los Angeles-based billionaire Ron Burkle. An attorney for Yucaipa was at the hearing Wednesday but declined to comment.

Craig Jung, Interstate Bakeries' chief executive, said removing confidentiality restrictions on some investors would give them an advantage over parties that have negotiated with the company under the existing conditions.

Jung also said he was still hopeful the company could make headway with the Teamsters and avoid a sale.

"I'm optimistic," he said. "At the end of the day, the best alternative for this company is not a sale of the company or part of the company."