Hostess announces mediation with union ahead of wind-down hearing

By Jim Witters

Wilmington, Del., Nov. 19 - Hostess Brands Inc. is entering confidential mediation on Nov. 20 with the Bakery, Confectionary, Tobacco Workers and Grain Millers' International Union (BCTGM), according to a company press release.

The company announced on Nov. 16 its intention to wind down operations and sell its assets, blaming a strike by the union.

Union officials countered that Hostess' financial distress was years in the making and resulted from poor business decisions, not the strike.

A hearing in the U.S. Bankruptcy Court for the Southern District of New York to consider the company's plan to wind down the business was postponed to Nov. 21 from Nov. 19.

Production remains shut down, the press release said.

Wind-down decision

As previously reported, the company said its board of directors authorized the wind-down to preserve and maximize the value of the estate after BCTGM, one of its largest unions, initiated a nationwide strike.

Hostess said that the strike crippled its ability to produce and deliver products at multiple facilities.

The company said it permanently closed three plants on Nov. 12 as a result of the work stoppage. On Nov. 14, the company announced it would be forced to liquidate if enough employees did not return to work to restore normal operations by 5 p.m. ET on Nov 15.

Hostess said it decided on the evening of Nov. 15 that not enough workers had returned to work to restore normal operations.

BCTGM rejected a last, best and final offer from Hostess in September that the company said was designed to lower costs so Hostess could attract new financing and emerge from Chapter 11.

Hostess received court approval on Oct. 3 to unilaterally impose changes to the BCTGM's collective bargaining agreements.

The company said it is unprofitable under its current cost structure, much of which is determined by union wages and pension costs.

Wind-down process

According to a motion filed on Nov. 16, the wind-down is projected to take one year and will be completed in four phases, including a plant wind-down, depot wind-down, retail store wind-down and corporate wind-down.

During the wind-down, Hostess said that all perishable baked goods inventory located at the retail stores will be either sold to customers through going-out-of-business sales, abandoned and donated to charity or destroyed or grouped together and transferred to owned retail stores.

The company said the wind-down means the closing of 33 bakeries, 565 distribution centers, about 5,500 delivery routes and 570 bakery outlet stores throughout the United States.

Hostess said its debtor-in-possession lenders have agreed to allow it continued access to the $75 million financing facility put in place at the start of the bankruptcy cases to fund the sale and wind-down process, subject to bankruptcy court approval.

The final hearing on the wind-down plan is scheduled for Nov. 29.

Hostess Brands is an Irving, Texas-based operator of regional bakeries. The company filed for bankruptcy on Jan. 11, 2012. Its Chapter 11 case number is 12-22052.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.