HOSTESS JUDGE APPROVES MOTION TO WIND DOWN COMPANY. Goodbye—
(@zerohedge) November 21, 2012
While things were looking up for Hostess earlier this week, plans for mediation with the bakers union fell through. In a hearing today, a judge gave Hostess the all-clear to begin shutting down operations and laying off employees:
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.
During a hearing that stretched for more than four hours, company executives and advisers espoused a simple message: expedited sales of the company’s brands will raise the maximum amount of money possible. And letting Hostess begin shutting its doors for good sooner would be kinder to employees.
Hostess’ chief executive, Gregory Rayburn, testified in court on Wednesday that he needed to lay off 15,000 of the company’s 18,500 employees that afternoon, so that they could begin applying for unemployment benefits. Such speed, he said, was necessary for maximizing the value of what remained of the 82-year-old company.
I made the decision to liquidate Hostess last night (Nov. 15). A number of factors have contributed to this. Hostess is 93 percent unionized, and it’s been formed by a number of acquisitions over the decades; a lot of old rules were just grandfathered into contracts from companies that no longer exist. There were all these crazy work rules, like one driver can only drive cake and the other can only drive bread. Hostess went through bankruptcy in 2004 and not enough work was done in that filing to deal with these issues.
I look at this as a failure. I’ve spent a lot of time wondering why we didn’t make more progress. I’m a turnaround guy, I’m a pretty optimistic guy. I don’t think this was the inevitable end. We had a shot at surviving, but we couldn’t overcome the strike. We have potential buyers for our brands and we’ll contact them, but I haven’t even thought about that yet. We sent everyone home from the plants. That’s 18,500 people out of work.
Thank goodness the bakers union was doing all this for the workers, right?
Hostess fans are taking the news pretty hard:
But not nearly as hard as the thousands of men and women who suddenly find themselves out of work. We can only hope they are able to find jobs soon.
This is indeed a sad ending for such an iconic American brand, but there is a silver lining: Hostess executives are confident that there are buyers out there interested in bidding on its assets.
More from Zero Hedge:
In the past five days, however, since Hostess officially launched its liquidation process, the company has received “a flood of inquiries,” said Hostess lawyer Heather Lennox, of Jones Day. The company expects to file a number a number of stalking-horse bids for its assets within the next few weeks, she said.
“The number of inbound calls has been surprising, on a number of fronts,” Scherer said. Those inquiries fall into four “buckets,” he explained. Offers have come from regional bakeries, national competitors, customers (such as Wal-Mart, Kroger and Giant Eagle), and a fourth catch-all category, including large consumer products companies. Scherer said the liquidation sale has generated “very significant interest” from international buyers as well.
Many of the buyers were uninterested in the assets when Hostess was weighed down by its union liabilities, he said. “We have very significant momentum right now with, from a selling perspective, positive press,” Scherer said. “It’s critical to maintain momentum and a competitive dynamic.”
So, while Hostess as we know it may cease to exist, Twinkie the Kid may not be ready to ride off into the sunset just yet.