Hostess Wins Final Court Approval to Wind Down
Hostess Brands Inc., maker of Twinkies and Wonder Bread, won final court approval to sell its assets and eliminate about 18,000 jobs in a liquidation that an adviser said has drawn “fast and furious” interest from potential buyers.
U.S. Bankruptcy Judge Robert Drain, at a hearing today in White Plains, New York, approved Hostess’s requests to shut down and to pay as much as $1.83 million in incentives to 19 senior managers, while overruling objections to the bonuses.
The sale process should “move quickly,” Drain said. He gave interim approval for the company’s wind-down plan Nov. 21.
Hostess is in active talks on asset sales with 110 parties, financial adviser Joshua Scherer of Perella Weinberg Partners LP told the judge today. Some of the would-be buyers are “large companies” with recognizable names, and some have hired investment bankers and are evaluating company data, Scherer added.
Hostess’s asset sales may generate about $1 billion, Scherer estimated last week. The company was worth $450 million in 2011, David Rush, the baker’s interim treasurer, told Drain today. The 2011 estimate should be reevaluated because of potential buyers’ interest in the company’s brands and intellectual property, Rush noted.
“We are very pleased with today’s outcome because it provides certainty to our employees and potential bidders that we are moving forward with the sale of our assets,” Tom Becker, a Hostess spokesman, said in an e-mailed statement.
Hostess, based in Irving, Texas, sought court protection in January, listing assets of $982 million and debt of $1.43 billion. The 82-year-old maker of Hostess Ding Dongs, Ho Hos and Sno-balls endured years of declining sales as consumers switched to healthier foods or migrated to other brands of snacks and breads, while increases in labor and supply costs further crimped profit.
Hostess filed Chapter 11 papers for the second time in January, less than three years after completing a restructuring that spanned 4 1/2 years.
The company, then known as Interstate Bakeries Corp., first sought court protection in its former hometown of Kansas City, Missouri, in 2004 blaming stiffer competition and higher prices for raw materials. Interstate left bankruptcy in February 2009 under the control of lenders and buyout firm Ripplewood Holdings LLC. It changed its name to Hostess Brands in October 2009, according to Bloomberg data.
The baker blamed the latest bankruptcy filing on a weak economy and costs tied to pensions and health-care obligations. The company’s decision to liquidate followed a weeklong strike by its bakery workers’ union that began after Drain imposed contract concessions opposed by more than 90 percent of the union’s members.
During today’s hearing, a Hostess lawyer told Drain that the baker won’t be able to provide retiree benefits to some former employees.
Heather Lennox, the Hostess attorney, said the company would cut $1.1 million a month slated for the pensioners. Drain approved formation of a Committee of Retired Employees to safeguard retirees’ rights during the liquidation.
The case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains).
To contact the reporter on this story: Phil Milford in Wilmington, Delaware at email@example.com