Hostess calls ruling repudiation of B.C.T.G.M. claim
by Josh Sosland
IRVING, TEXAS -- A judicial decision in the Hostess Brands bankruptcy allowing the company to impose bargaining agreement changes on a major union represents a clear refutation of union leadership claims that an alternative buyer was waiting in the wings, according to the company.
Hostess issued the statement after an Oct. 3 decision by Judge Robert D. Drain of the United States Bankruptcy Court Southern District of New York approving a Hostess Brands’ motion to impose changes to collective bargaining agreements on the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. The ruling also allows the company to impose “nearly identical changes” on five other smaller unions, two of which had voted against accepting the company’s offer.
Hostess said the ruling applies to agreements that are currently in effect and applies on an interim basis on another 18 that had expired earlier in 2012. The interim approval is meant to allow both parties to resume contract negotiations at a later date, Hostess said.
“One of the key elements of the trial was whether a third party had recently stepped forward with a viable offer to acquire the entire company,” Hostess said. “Were this the case, it would have had a dramatic effect on the case by providing an alternative to the current exit strategy, whereby the company’s existing lenders have agreed to fund the company’s exit from Chapter 11 in exchange to concessions from all employees.”
The idea an alternative buyer was ready to buy the company was perpetuated by the B.C.T.G.M., Hostess said, citing a Sept. 4 letter from union leadership stating:
“We believe there are parties … who may be prepared to invest in or purchase the company or a significant portion of the baking facilities if the proposal is declined.” The letter went on, “... There may be other operators who may purchase individual plants and provide collective bargaining agreements similar to those that have been in place at the company.”
Hostess said testimony at the Oct. 3 hearing “clearly refuted this claim and confirmed the company’s assertion that there are no viable bidders waiting to purchase the entire company.”
In particular, Hostess chief executive officer and chairman Gregory F. Rayburn and Joshua S. Scherer, a partner at Perella Weinberg Partners, the company’s financial adviser, testified that “the only recent offer came from an investment bank that had no financing and whose offer was far from viable, in part because it called for the dissolution of union drivers.”
The offer was “an idea that was put together by an investment banker with no committed financing,” Mr. Scherer said in his testimony. “This idea is simply not feasible. It cannot be implemented.”
Hostess said the judge was unequivocal in his response.
“The evidence is crystal clear from the testimony of Mr. Rayburn and Mr. Scherer that there is no third party alternative before the debtors at this time,” Mr. Drain said.
Offering an update of the status of union votes on the Hostess proposal to modify collective bargaining agreements, Hostess said the following have ratified the offer:
• International Brotherhood of Teamsters
• United Automobile, Aerospace and Agricultural Implement Workers of America
• United Steelworkers
The following were considering the offer:
• Office & Professional Employees International Union
• Retail, Wholesale and Department Store Union
• United Food and Commercial Workers Union
The following did not contest the offer:
• Glass, Molders, Pottery, Plastics & Allied Workers International Union
• International Brotherhood of Firemen and Oilers
• United Brotherhood of Carpenters and Joiners of America
And the following rejected the offer and are subject to the ruling:
• The Bakery, Confectionery, Tobacco Workers & Grain Millers International Union
• International Association of Machinists and Aerospace Workers
• International Union of Operating Engineers & Service Employees.