Hostess Chapter 11 Trustee Sought by Bakers’ Union

A Hostess Brands Inc. union and a pension fund asked the judge overseeing the company’s bankruptcy to appoint a Chapter 11 trustee to wind down the maker of Twinkies and Wonder Bread.

“A Chapter 11 trustee must be appointed to oversee the debtors’ orderly liquidation and protect the best interest of creditors,” according to a filing today in U.S. Bankruptcy Court in White Plains, New York, by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union and the Bakery and Confectionery Union and Industry International Pension Fund.

Hostess, based in Irving, Texas, last week won interim approval from U.S. Bankruptcy Judge Robert Drain to shut down and start selling assets after last-minute mediation with the bakers’ union failed to resolve a contract dispute, leaving more than 18,000 jobs at risk.

Drain rejected a request by U.S. Trustee Tracy Hope Davis to convert the Hostess case to a Chapter 7 liquidation from Chapter 11, which would have handed control over the asset sales to a conservator. Conversion “would be a disaster,” Drain said.

Union and pension-fund lawyers said in court papers they support an “orderly” wind-down but “object to that process being carried out by incumbent management.” The company is incurring debt that can’t be repaid in an attempt to implement a reorganization plan that can’t be confirmed, they said.

Exit Strategy

If the proposed asset sales are completed, ‘in the absence of unanimous creditor consent, there is no viable exit strategy from these administratively insolvent cases,’’ the lawyers said. Hostess eventually will have to pay for both the Chapter 11 case and a subsequent Chapter 7 proceeding, they said.

The union and the pension fund asked to have the request for a trustee heard on Nov. 29, when Hostess will seek final approval for its wind-down motion.

“The debtors believe that there are serious legal deficiencies in the relief requested,” Hostess said in court papers objecting to the request to have the matter heard on short notice. “These issues must be considered and addressed and, where appropriate, briefed.”

Hostess, the 82-year-old maker of Ding Dongs, Ho Hos and Drake’s Devil Dogs, said it was pushed toward liquidation when the bakers’ union went on strike Nov. 9 after Drain imposed contract concessions opposed by 92 percent of the union’s members.

Hostess sought court protection in January, its second time in bankruptcy, listing assets of $982 million and debt of $1.43 billion.

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

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