Hostess, Union Mediation Fails, Court OKs Wind Down

by Judie Bizzozero, Senior Editor

IRVING, TexasThe U.S. Bankruptcy Court for the Southern District of New York today approved Hostess Brands, Inc.s emergency interim motion for the orderly wind down of its business and sale of its assets. Judge Robert Drain approved the motion after the company and the Bakery, Confectionary, Tobacco and Grain Millers Union (BCTGM) were unable to reach an agreement during an 11th-hour mediation yesterday.

The shuttering of Hostess business operations will result in the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes, 570 bakery outlet stores and the loss of 18,500 jobs. Hostess Brands will sell its popular brands, including Hostess®, Drakes® and Dolly Madison®, which make iconic cake products such as Twinkies®, CupCakes, Ding Dongs®, Ho Hos®, Sno Balls® and Donettes®. Bread brands to be sold include Wonder®, Natures Pride®, Merita®, Home Pride®, Butternut® and Beefsteak®, among others.

The court order allows Hostess Brands to return excess ingredients and packaging; provides liquidity through an amended debtor-in-possession financing agreement and consensual use of cash collateral; and authorizes the company to implement a non-executive employee retention plan to ensure the company has the necessary personnel to implement the wind down.

Hostess Board of Directors authorized the wind down of Hostess Brands to preserve and maximize the value of the estate after BCTGM initiated a nationwide strike on Nov. 9. On Nov. 16, the snack maker filed a motion in U.S. Bankruptcy Court to shutter its operations and liquidate its assets. On Nov. 19, the court ordered Hostess and BCTGM to enter a confidential mediation on Nov. 20, but it was unsuccessful.