Court gives Hostess green light to liquidate
November 21, 2012
by Josh Sosland
IRVING, TEXAS — Hostess Brands, Inc. said its emergency interim motion for the orderly wind down of its business and sale of its assets has been approved by the U.S. Bankruptcy Court of the Southern District of New York.
A hearing to consider the motion was held Nov. 21. The company said Judge Robert Drain approved the motion after a mediation between Hostess and the Bakery, Confectionery, Tobacco and Grain Millers Union failed to lead to an agreement.
The balance of the Hostess statement follows:
Among other provisions, the court order allows Hostess Brands to return excess ingredients and packaging; provides liquidity through an amended debtor-in-possession financing agreement and consensual use of cash collateral; and authorizes the company to implement a non-executive employee retention plan to ensure the company has the necessary personnel to implement the wind down.
Hostess Brands said it intends to retain approximately 3,200 employees to assist with the initial phase of the wind down. Employee headcount is expected to decrease by 94% within the first 16 weeks of the wind down. The entire process is expected to be completed in one year.
The wind down was necessitated by an inflated cost structure that put the company at a profound competitive disadvantage. The biggest component of the company’s costs was its collective bargaining agreements that covered 15,000 of 18,500 employees.
Hostess Brands worked tirelessly to complete a reorganization of its business as a going concern, including spending the better part of 18 months negotiating with its key constituents to obtain a consensual agreement to lower costs to a sustainable level. The company had obtained the support of its largest union, the International Brotherhood of Teamsters, and its lenders. However, the B.C.T.G.M. leadership chose not to negotiate a new labor contract and instead, when presented with a final offer, launched a campaign to cripple the company’s operations and force it to liquidate.
The wind down means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes, 570 bakery outlet stores and the loss of 18,500 jobs.
Prospective bidders for the company’s assets should contact the following representatives:
Brands: Perella Weinberg at firstname.lastname@example.org
Assets: FTI Consulting at email@example.com
For employees whose jobs will be immediately eliminated, additional information can be found at this web site (www.hostessbrands.com), which also contains a copy of the company’s wind-down motion and information for customers and vendors.