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Late last night, a last-ditch mediation between Hostess Brands and the bakers' union broke down, prompting the company to seek permission to wind down its operations.  This afternoon, a federal bankruptcy judge granted the request.

In granting Hostess’s motion, Judge Robert D. Drain of the Federal Bankruptcy Court for the Southern District of New York cited the need for a quick and orderly shuttering of the company to avoid letting its assets molder. The alternative, a less-structured Chapter 7 liquidation would be far worse.

“This estate will suffer substantial diminuition if this wind-down plan is not quickly implemented,” he said. “It appears to me that the debtors have taken the right course.”

Judge Drain’s motion spells the almost certain end of Hostess, an 82-year-old bakery that survived the Great Depression, numerous wars and countless low-carb diets. But the company, whose stable of sugary confections also include Ho Hos and Ding Dongs, struggled for more than a decade with the public’s increasing fondness for lower-calorie, less-processed snacks.

Hostess CEO Gregory Rayburn--whose hefty compensation package is partly responsible for the company's troubles--sought permission to wind down immediately so he could give 15,000 of the company's 18,000 employees time to apply for unemployment benefits.  He also said the company needed to wind down in order to make it more attractive to prospective buyers.

According to Hostess' investment banker, prospective buyers for Hostess' remains include several regional bakeries, as well as several competitors and retailers.  Sun Capital Partners has already said it wants to buy all of Hostess.

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Comment Preferences

  •  Tip Jar (7+ / 0-)

    Romney-Ryan: America's Rollback Team

    by Christian Dem in NC on Wed Nov 21, 2012 at 03:15:55 PM PST

  •  srsly? (7+ / 0-)
    Hostess CEO Gregory Rayburn--whose hefty compensation package is partly responsible for the company's troubles-
    $3MM on $350MM loss = .8%.

    At any rate, query what will happen to the pension liability, if that will get discharged or shunted, in part, on to the PBGC

  •  Basically, what looks like will happen (5+ / 0-)

    1.  The owners/investors will take losses in the bankruptcy, but apparently less than the losses they thought they would sustain if they had agreed to the position the union was striking for.

    2.  Someone will likely buy the most successful brands owned by Hostess (Twinkies, for example) and that entity will likely renew production in a new facility, perhaps in a "right to work" state, so as to cut labor costs.

    3.  The union will no longer have any legal ties to the producer of Twinkies and all the other products (since Hostess will liquidate and any union contract will not be binding on an entity that simply buys assets of Hostess, like the brands).

    4.  The 18,000 employees will lose jobs.  Depending on where the purchaser of Hostess assets locates the new production of the products, some of them may be able to be hired by the purchaser, but likely at far less than the Union was seeking and perhaps even without union representation.  

    A loss all around, except perhaps for the purchaser of the assets, who may well be able to produce Twinkies based on the terms Hostess sought to have with the union.  

    •  The pay of the Hostess employees (3+ / 0-)
      Recommended by:
      VClib, JGibson, CA wildwoman

      after their last concession is below industry norms. I doubt people realize that most of the snack food industry from Nabisco to Kellogg to Hershey to Bimbo the bread magnet from Mexico are all union. At least on the distribution end.

      I know noting about the production end but the retail sales managers are in high demand in this area. Snack foods may not be all that good for us but the industry itself is thriving.

      I just saw our local hostess guy he was thrilled to be taking over a Pepperidge Farm territory at starting wage higher than he was making after 10 years with Hostess.

      The company itself had problems that did not involve either union or CEO pay. If someone buys them straightening them out may very well involve new bakeries in places where there have not been any. Part of their problem was that they were to centralized. Snack food does not suffer long distance travel well. The most successful snack food companies have manufacturing facilities in most major cities. Nabisco and Frito are good examples.

      You can expect to see twinkies on the shelf again, probably before spring.

      It is the heart that makes a man rich. He is rich according to what he is not what he has -Henry Ward Beecher

      by PSWaterspirit on Wed Nov 21, 2012 at 07:16:55 PM PST

      [ Parent ]

      •  PSW - I agree (0+ / 0-)

        someone with the right infrastructure, and modern facilities,  will purchase the brands and the products will be back on the shelves before too long. They may even sell the rights to the Hostess brands on a regional basis.

        "let's talk about that"

        by VClib on Wed Nov 21, 2012 at 08:38:59 PM PST

        [ Parent ]

    •  You missed the part where owners renege on (0+ / 0-)

      Their pension obligations, and dump it on the taxpayers.

  •  Sad day. (1+ / 0-)
    Recommended by:
    Lujane

    Company was all loaded up on debt Bain style.

    Didn't this company buy up all the regional bakeries that were profitable and load up with debt in the process?

    "We must be the change we wish to see in the world" - Gandhi
    "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little" – FDR

    by smokey545 on Wed Nov 21, 2012 at 04:43:18 PM PST

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