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Archive for Friday, September 24, 2004

Bakery wins OK for loan

Twinkies maker gets $50 million to keep operating

September 24, 2004

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— A federal bankruptcy judge on Thursday approved a $50 million loan to Interstate Bakeries Corp. so that it could continue operating for another month.

U.S. Bankruptcy Judge Jerry Venters said he would consider approving an additional $150 million in financing at a hearing on Oct. 21.

Attorneys for the nation's largest wholesale baker said the company needed the money to pay its 32,000 employees and keep its bread and snack cakes rolling to customers.

Interstate Bakeries, maker of such household names as Wonder Bread and Hostess Twinkies, filed for protection from its estimated 500,000 creditors on Wednesday, saying it had $1.6 billion in assets and $1.3 billion in debt and other liabilities.

The company's board also accepted the resignation of chief executive James Elsesser, replacing him with Tony Alvarez, who operates turnaround firm Alvarez & Marsal.

Interstate Bakeries blamed its failing on decreased sales, due in part to the popularity of low-carbohydrate diets such as Atkins, a glut of baked goods in the market and high operational costs, including employee benefits and ingredient costs.

During Thursday's court hearing, the company's lead bankruptcy attorney, Eric Ivester, said while the company put out whole grain and low-carb breads earlier this year, the offerings came too late.

For now, he said, the company's new management intended to reassure vendors, customers and employees of Interstate Bakeries' continued viability.

Ivester sketched out the beginnings of the company's plan to return to profitability. It starts, he said, with trying to increase market share in regions where the company already considers its bread and snack cakes to be dominant: southern California, the upper Midwest, the Northeast, Middle Atlantic states and Florida.

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