Hostess Mediation Fails; Liquidation Near

on November 20 2012 8:22 PM

Hostess Brands Inc., the bankrupt maker of Twinkies, said Tuesday that mediation with the Bakery, Confectionary, Tobacco and Grain Millers Union had failed to reach agreement and it will seek to liquidate.

The company said it will have no further comment until a hearing scheduled for 11 a.m. Wednesday before the U.S. Bankruptcy Court for the Southern District of New York in White Plains, Reuters reported.

A representative of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union did not immediately respond to a request for comment.

Earlier Tuesday, the head of the bakers union whose strike precipitated Hostess liquidation plans didn't attend a last-ditch mediation session and wasn't hopeful about its prospects, The Wall Street Journal reported.

"I'm not too optimistic about this mediation," Frank Hurt, president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, said when reached in Columbus, Ohio. He said he couldn't get to New York, where the session was taking place; instead, he said, the union's secretary-treasurer was attending.

Hostess, which also makes Wonder Bread and Drake's cakes, sought permission from bankruptcy court Monday to liquidate, claiming that its operations were crippled by the bakers' strike and that winding down was the best way to preserve its dwindling cash.

But Bankruptcy Judge Robert Drain of the Southern District of New York urged the sides to go into a private mediation in a bid to save the more than 18,000 jobs at stake.

The 82-year-old Hostess runs 33 bakeries, 553 distribution centers, about 5,500 delivery routes and 527 bakery outlet stores throughout the United States. Bakery operations ceased last week, though product deliveries to stores continued in order to sell already-made products.

The company has blamed union wages and pension costs for contributing to its unprofitably. Hostess Chief Executive Gregory Rayburn has also said the company's labor contracts have deterred would-be bidders for the company and its assets.

Bankers have said rivals including Flowers Foods and Mexico's Grupo Bimbo were very likely to be interested in parts, but not all of, the brands. Neither company could be reached for comment. Private equity firms are also interested.

Sun Capital Partners is interested in bidding for all of Hostess, according to a source familiar with its plans, and Metropolous & Co is also interested, according to Daren Metropolous, a principal at the firm.

Officials at Sun did not respond to requests from Reuters for comment.

 

 

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