Thread: Twinkies maker Hostess going out of business - Nearly 18,500 workers will lose jobs

Goodbye Hostess


Submitted by Tyler Durden on 11/21/2012 15:35 -0500

• Jones Day
• None
• Perella Weinberg
• Unemployment
• Unemployment Benefits

Everyone loses:

• HOSTESS JUDGE APPROVES MOTION TO WIND DOWN COMPANY
• HOSTESS WINS APPROVAL TO CLOSE AND BEGIN SELLING ASSETS

Next up: the Twinkie economy.

Fom Leveraged Loan:

U.S. Bankruptcy Judge Robert Drain this afternoon approved Hostess Brands’ emergency wind-down plan, as well as an amendment to its debtor-in-possession credit agreement that will allow Hostess to access the full amount of its $75 million DIP loan during its liquidation.

Drain also denied a motion filed by the U.S. Trustee to convert the case to Chapter 7, though he did not rule out the prospect of a conversion at a later date.

Hostess returned to the bankruptcy courthouse in White Plains, N.Y., this morning after a last-minute mediation yesterday between the company and its main bakers’ union failed to produce a settlement to halt liquidation of its assets. The hearing began Monday afternoon, but was delayed shortly thereafter to give the company and the Bakery, Confectionary, Tobacco and Grain Millers Union a final opportunity to engage in mediation to avert the strike the BCT began last week. But by Tuesday evening, Hostess announced that the mediation was “unsuccessful.”

Judge Drain opened today’s hearing with a brief, private chambers conference to discuss the mediation, the details of which remain confidential.

Back in open court, Hostess financial advisor Joshua Scherer, of Perella Weinberg, took the witness stand to discuss the company’s failed efforts to sell the company as a whole, and the status of its newly launched liquidation strategy.

During its Chapter 11, Hostess fielded six bids for the sale of the company as a whole, none of which passed muster, Scherer said.

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.”

“Every day our product is off the shelf, it’s diminishing in value. Our customers get used to selling goods without our brands, and the end-users learn to live without Twinkies and Wonder Bread.”

On the stand, Hostess CEO Gregory Rayburn said he needs to terminate about 15,000 employees today so that they can collect unemployment benefits. Drain approved an employee retention plan that would keep about 3,200 employees on the job during the wind-down process.

Goodbye Hostess | ZeroHedge

Thursday, November 22, 2012 10:43 AM

Hostess Fires 15,000 Workers in Liquidation; Twinkies Silliness From Readers


The BBC reports Twinkies firm Hostess Brands wins liquidation bid.

Note that the first step in liquidation will be the firing of 15,000 workers including the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores.

At least a dozen readers sent emails in response to my previous two posts on Twinkies.

One misguided soul from the Netherlands wrote "Your article on the bankruptcy of Hostess is so extremely biased. I am NOT surprised because you're ALWAYS bashing the unions."

Many emails including the one from the Netherlands pointed to articles such as Vulture capitalism ate your Hostess Twinkies.

One person accused me of being an extreme right-winger. I also received comments about me being an extreme left-wing Obama fan.

Silliness is clearly in the eyes of the beholder as it is impossible for both of those to be true. (In fact, neither is true because I am issue-based, not political party based, and I have huge differences with both major political parties).

I sometimes wonder if people can read.

Regarding Twinkies, I distinctly stated on my blog and I repeat (emphasis added)...

There is plenty of blame to go around, including untenable wages and benefits, leveraged debt, untenable management salaries etc.

However, the enabling factor behind the debt is loose monetary policy by the Fed coupled with fractional reserve lending. Factor in unions and corrupt management and there is no way the company could make it without huge concessions from the union.

Still, it is difficult to have much sympathy for those who vote to have no job in these trying times.

The union will likely see pension benefits slashed by 50% or more when handed over to the Pension Benefit Guarantee Corporation (PBGC). The PBGC is of course US taxpayers who should not have to pick up any of this tab at all (but they will).

The person who accused me of being an extreme right-winger heard me on Coast-to-Coast where I mentioned "vulture capitalists" and leveraged debt.

So yes, I am aware of leverage. I am also aware of huge raises and other poor management decisions.

The facts remain as follows

1. The Fed's loose monetary policy and fractional reserve lending enable leveraged buyouts
2. The unions made a piss poor choice

Past is Irrelevant

There was an offer on the table that would have saved 15,000 jobs. The union said no.

Are those 15,000 people better off with no job than a job?

That is all that matters. Management salaries and leveraged debt are in effect sunken costs. If the majority of those people can go out and find a better deal, then they made the correct choice. If not, they didn't.

Given that accrued pension benefits went up in smoke in addition to all those jobs, I strongly suggest the union made a very poor choice.

I freely admit that if a majority of those workers can find better jobs with better benefits, then I am mistaken. However, that begs the question: If those workers could do better elsewhere, than why were they working for Hostess in the first place?

Like it or not, nothing else matters. Cutting off your nose (or your job) to spite management is not a smart thing to do.

Mike "Mish" Shedlock
Mish's Global Economic Trend Analysis


Mish's Global Economic Trend Analysis: Hostess Fires 15,000 Workers in Liquidation; Twinkies Silliness From Readers