Hostess Archived Posts (2012)

11/29/12-

Today, Hostess sought approval of the following in the U.S. Bankruptcy Court for the Southern District of New York (White Plains):

  • Executive bonuses (to retain 19 corporate officers) in the aggregate of $1.8 million as a part of the company’s wind-down process;  and
  • Final approval for its wind-down, which was approved on an interim basis last week.  “The wind-down process includes the quick sale of Hostess brands, which also include Devil Dogs, Donettes and Wonder Bread.”  Hostess said it has received a flood of interest in the brands, and that “it’s in talks with 110 potential buyers for its iconic brands, which also include Cup Cakes, Ding Dongs and Ho Hos.”

The bakers’ union, however, countered with a request for the appointment of a trustee to oversee the wind-down, citing the current management’s incompetency to oversee same.  In addition to its lack of contribution to bakers’ union pension plans for more than one year, counsel for Hostess announced today that the company can no longer pay retiree benefits.

The court approved Hostesses’ bonus plan.

See more of this story at http://www.huffingtonpost.com/2012/11/29/hostess-executive-bonuses_n_2210515.html (above quotations attributed to same source).

11/26/12-

On November 21, 2012, The Wall Street Journal/MarketWatch reported the following:

Hostess Brands Inc. said Wednesday that it received court approval to wind down the business, and that prospective bidders should contact the company’s representatives. The maker of Twinkies and Wonder Bread said the U.S. Bankruptcy Court for the Southern District of New York approved its emergency motion to begin liquidation. Brand sales will be handled by Perella Weinberg Partners and asset sales will be handled by FTI Consulting, according to Hostess. The company will retain 3,200 of its workers for the initial phase of the liquidation, and cut 94% of its staff within the first 16 weeks of the process, completing the liquidation in one year. As a result, 33 bakeries, 565 distribution centers and 570 bakery outlet stores will be closed, resulting in the loss of 5,500 delivery routes and 18,500 jobs.

Wallace Witkowski, Hostess gets court approval to liquidate, MarketWatch, http://articles.marketwatch.com/2012-11-21/industries/35252132_1_liquidation-hostess-brands-twinkies-and-wonder-bread.

11/21/12-

The Hostess Brands, Inc. mediation has failed and the company is preparing to liquidate.  A Hostess attorney said, “things have gone too far in terms of financial damage,” and a union attorney noted that although the union was respectful of the bankruptcy judge’s urgings to mediate, it is doubtful that the impasse can be broken.

A hearing regarding same is scheduled for this morning, before Judge Robert Drain in the U.S. Bankruptcy Court in White Plains, New York. Judge Drain previously encouraged the mediation, stating, “Not to have gone through that step leaves a huge question mark in this case.”  Hostess will be seeking approval from the court to proceed with a liquidation.

The Associated Press summarized the events leading to the impending liquidation:

Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of Americans, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell its assets and wind down its business.

The company, which is in its second bankruptcy in less than a decade, had said that it was saddled with costs related to its unionized workforce. It brought on Rayburn as a restructuring expert in part to renegotiate its contract with labor unions.

Hostess, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would’ve slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. The baker’s union rejected the offer and decided to strike.

By that time, Hostess had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakers union to hold a secret ballot on whether to continue striking. Although many workers in the bakers union decided to cross picket lines this week, Hostess said it wasn’t enough to keep operations at normal levels.

Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The bakers union said the company’s demise was the result of mismanagement, not the strike. It pointed to the steep raises executives were given last year as the company was spiraling down toward bankruptcy.

The company’s announcement last week that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy cakes turned up for sale online for hundreds of dollars.

Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess’ sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies alone brought in $68 million so far this year.

Currently, its being reported that:

Potential buyers have already started circling Hostess’s carcass. Flowers Foods Inc., FLO +5.47% of Thomasville, Ga., whose brands include Nature’s Own bread and Tastykake snack cakes, said Monday it has renegotiated lending terms to allow it to tap additional cash.

Analysts see that as a clear sign it is gearing up to bid on Hostess assets. And private-equity firm Sun Capital is interested in making an offer for Hostess’s entire business, said a person close to the firm.

Sources:

Rachel Feintzeig, Hostess Plan to Liquidate After Mediation Fails, The Wall Street Journal, http://online.wsj.com/article/SB10001424127887323713104578131502378821868.html, Nov. 21, 2012.

Michael Winter, Hostess Mediation Fails, So Twinkies Company to Liquidate, USA Today, http://www.usatoday.com/story/news/nation/2012/11/20/hostess-union-mediation-fail-liquidation/1718231/, Nov. 20, 2012.

Candice Choi, Twinkies Maker Hostess Lives At Least Another Day, The Associated Press, http://hosted.ap.org/dynamic/stories/U/US_HOSTESS_BANKRUPTCY_HEARING?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT, Nov. 19, 2012.

Advertisements