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Hostess Judge to Weigh Shutdown After Mediation Fails

Hostess Brands Inc. will ask a bankruptcy judge today for permission to shut down permanently, costing more than 18,000 jobs, after mediation with its bakers’ union failed to resolve a contract dispute.

“A mediation today with the Bakery, Confectionary, Tobacco and Grain Millers Union was unsuccessful,” Hostess said yesterday in a statement. The company said it wouldn’t comment further until today’s court hearing.

U.S. Bankruptcy Judge Robert Drain in White Plains, New York, on Nov. 19 adjourned a hearing where Hostess planned to seek approval to close and sent the parties off for a last-ditch effort to negotiate terms that might keep the floundering company afloat.

“I’m giving the union as well as the debtors and their lenders a last chance to try and work those issues out in private,” Drain said at the Nov. 19 hearing. He cited “serious questions as to the logic behind the decision” by the bakers’ union to strike.

Hostess and the union agreed to Drain’s request to enter confidential mediation under his supervision. They met yesterday at the law offices of Jones Day in New York. Drain postponed until today the hearing on Hostess’s request to shut down and move toward liquidation.

Corrina Christensen, a spokeswoman for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, didn’t immediately return a call seeking comment on the failed mediation after regular business hours.

``Unfortunately, the last-minute mediation efforts by Judge Drain were not successful,'' Ken Hall, general secretary-treasurer of the Teamsters union that represents Hostess drivers, said in a statement. ``This is a tragic outcome.''

Contract Imposed

Hostess said it was forced to opt for liquidation after the union went on strike Nov. 9. The union, representing about 5,000 Hostess workers, walked out after Drain imposed contract concessions opposed by 92 percent of the union’s members.

Hostess, based in Irving, Texas, is asking the judge for approval to shut down 36 bakeries, 242 depots, 216 retail stores, and 311 hybrid depot-store facilities, according to court filings. There are 58 other leased or owned sites used for storage, warehousing of products or parking. The plants are in 22 states, stretching from Alaska to New Jersey.

Hostess sought court protection in January, its second time in bankruptcy, listing assets of $982 million and debt of $1.43 billion. The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos has endured years of declining sales as Americans turned to rivals’ snacks and breads, while ingredient costs and labor expenses climbed.

The case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains).

To contact the reporters on this story: Dawn McCarty in Wilmington at dmccarty@bloomberg.net; Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; John Pickering at jpickering@bloomberg.net

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