Hostess begins firings after request to shut down approved
VideosTwinkies won't die that easily after all Twinkies likely to survive sale of Hostess Customers saddened as Hostess makes plans to shut down
Hostess Brands, the baker of Twinkies and Wonder bread, began firing employees after winning interim court approval to shut down and start selling assets that a financial adviser said may bring in $1 billion.
U.S. Bankruptcy Judge Robert Drain Wednesday approved Hostess' request to close at a hearing in White Plains. Chief Executive Officer Gregory Rayburn said 15,000 workers would be fired the same day so they could start receiving unemployment benefits. Hostess said Friday that it needed to liquidate because a weeklong strike by its bakers' union crippled operations.
Sales of Hostess assets may generate about $1 billion, financial adviser Joshua Scherer of Perella Weinberg Partners told Drain. The judge approved going-out-of-business sales at Hostess' retail outlets and the return of excess ingredients and packaging. Final approval of the wind-down plan will be considered Nov. 29, and Hostess will seek court approval later for sales of major assets, such as its brands.
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There is "very intense" competition for the brands, Scherer said in court. A sale would be a "once in a lifetime opportunity for our competitors to get iconic brands," he said. The 82-year-old company makes Wonder bread, Hostess CupCakes, Ding Dongs, Ho Hos and Drake's Devil Dogs.
Most of the wind-down will take place in the first three months, said Heather Lennox, a lawyer for Hostess with Jones Day. Quick asset sales may preserve some jobs, Scherer said. A prospective buyer visited a Drake's cake factory Nov. 20 and asked whether its acquirer "could rehire employees who worked here," he said.
Rayburn asked Drain to shield company officials from lawsuits over the firings. Hostess has been spending about $1 million a day for payroll since halting operations last week, down from $2 million a day, Rayburn said.
Hostess said about 3,200 employees will stay on temporarily to clean plants and mothball equipment. Drain approved a plan to retain the employees, as well as a request to use cash collateral and an amended financing agreement for the company.
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 trustee. Conversion "would be a disaster," Drain said.
Charles Carroll, an adviser to Hostess with FTI Consulting, argued that a trustee would "take time to get up to speed" while the assets' values declined.