Bankrupt Interstate Bakeries' bonus plan sparks objections

Kansas City Star

February 21, 2008

Several parties in Interstate Bakeries' reorganization have filed objections to the bankrupt company's plan to pay more than $6 million in bonuses to 514 management employees.

Objections came from the unsecured creditors committee, which represents creditors owed $330 million; the International Brotherhood of Teamsters; and the Bakery, Confectionery, Tobacco Workers and Grain Millers Union. The unions represent IBC's 20,000 union employees.

The creditors committee notes that more than 30 percent, or $1.8 million of the total bonus amount, is allocated to a group of 17 individuals. Of that $1.8 million, four individuals are to receive about 15 percent of the total, or $892,000.

The committee argued that IBC's proposal fails to 'articulate a reasonable basis for why the incentive plan should be approved at this late stage in the (company's) fiscal year.'

'In essence, the incentive plan seeks to pay selected employees significant bonuses for work they would have performed even if no incentive program was instituted,' the court filing said.

The unions argued the funds that IBC is proposing to spend is money that it 'can't afford to spend at this point.'

The objection also says that the employees have nothing to show for their work over the past eight months other than drafting a plan of reorganization, which depends on the company reaching new agreements with the Teamsters.

Interstate, one of the largest wholesale bakers in the U.S. and maker of iconic brands such as Wonder bread and Hostess Twinkies, filed for bankruptcy reorganization in September 2004. Since then, the company has closed bakeries and consolidated depots and delivery routes.

A judge in U.S. Bankruptcy Court last month approved IBC's disclosure statement. It contains information the company is sending to creditors on its plan of reorganization and other details for creditors to decide whether or not to approve.

A hearing is scheduled for March 12 for IBC to disclose the tally of that vote.

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