Twinkies maker facing end, but life seen for brands
By Martinne Geller and Jonathan Stempel | November 22, 2012 6:42 AM EST
Hostess Brands Inc on Wednesday appeared headed toward a liquidation, though its lawyers and advisers expressed optimism that they will find new homes for many of its iconic brands, which include Twinkies, Drake's cakes and Wonder Bread.
U.S. Bankruptcy Judge Robert Drain in White Plains, New York, held a hearing to consider initial approval of the 82-year-old company's plan to wind down over the next year.
Drain's last-ditch mediation to resolve Hostess' differences with its striking bakers' union had broken down on Tuesday.
"Unfortunately, we're faced now with the matters that were originally scheduled for Monday and were adjourned to today, to deal with the issues facing the debtor in their need to preserve and ... maintain their value in a liquidation scenario," Drain said.
Heather Lennox, a lawyer for Hostess, told the judge that the company has received a "flood of inquiries" from potential buyers for several brands that could be sold at auction and expects initial bidders to surface within a few weeks.
Joshua Scherer, a partner at Perella Weinberg Partners, which is advising Hostess, said the company was in "active dialogue" over its Drake's brand with one "very interested" party that had toured a New Jersey plant on Tuesday.
He said regional bakeries, national rivals, private equity firms and others have also expressed interest in various brands and that more than 50 nondisclosure agreements have been signed.
"These are iconic brands that people love," Scherer said.
As for the value of the company, Scherer said Hostess could be worth $2.3 billion to $2.4 billion in a normal bankruptcy, an amount equal to its annual revenue. It also has about $900 million of secured debt and faces up to about $150 million of administrative claims.
But Scherer expects a discount in this case because plants have already been closed and Hostess' value could fall further if the liquidation were dragged out.
"I've had buyers tell me, 'Josh, the longer it takes ... the less value I'm going to be able to pay you,'" he said.
Hostess decided to liquidate on November 16, saying it was losing about $1 million per day after the Bakery, Confectionery, Tobacco and Grain Millers Union, representing close to one-third of its roughly 18,000 workers, went on strike a week earlier.
The bakers union walked out after Drain authorized Hostess to impose pay and benefit cuts, which the International Brotherhood of Teamsters, Hostess' largest union, had accepted.
Hostess has about 33 plants, plus three it decided to close after the strike began, as well as 565 distribution centers and 570 bakery outlet stores.
As part of a liquidation, the Irving, Texas-based company would immediately terminate about 15,000 employees.
It said it expects to keep about 3,200 workers to help shut its properties and prepare them for sale, but that only approximately 200 people would remain employed by late March.
Hostess had filed for Chapter 11 protection on January 11, its second bankruptcy filing in less than three years.
(Additional reporting by Adam Kerlin and Peter Rudegeair in White Plains, New York; Editing by Gerald E. McCormick and Dan Grebler)
Most Popular Slideshows
- Still The World Champions: Team USA Overpowers Serbia, 129-92 To Win 2014 FIBA World Cup [PHOTOS]
- Pope Francis: World War III Has Started On Piecemeal
- After Win Over Maidana, Mayweather Says He Is Prepared To Negotiate A Fight With Pacquiao
- From Fat To Fit: Celebrities Who Were Overweight Before They Became The Beauties That They Are
Join the Conversation
- iOS 8 Release Date Of Sept 17 Has Arrived: Update Begins At 10AM Pacific Time, Upgrade Your iDevices With iOS 7.1.2 First To Install iOS 8
- Pregnant Kate Middleton May Call Off Malta Trip Due To Sickness: Royal Couple Will Move To Anmer Hall Residence
- Apple iPad Air 2, iPad Mini 3 October Release Date Roundup: Freshly Leaked Protective Case Debuts Unique Vent Alongside Camera
- Why Samsung Galaxy S5 Is Not The Best Smartphone To Purchase Now? If You Still Want To, Wait For A Month To Get It Cheap
- Ukraine Crisis: Poland Denies Supplying Weapons To Kiev
- Google Nexus 8 Release Date Countdown Begins Oct 8: 8 Killer Specs and Features to Expect
- Malaysia Airlines Flight MF 370: Indonesian Police Chief Claims He Knows What Happened To Missing Jet