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.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.
“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.
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.