Hostess Brands creditors committee objects to exclusivity extension

By Jim Witters

Wilmington, Del., April 10 - Hostess Brands, Inc.'s official committee of unsecured creditors objects to the company's request for a 90-day extension of its exclusive periods for filing a Chapter 11 plan and soliciting plan acceptances, according to documents filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

The creditors committee also moved for an order directing the debtors to remove the "debtor lock-up."

The lock-up is a provision inserted in the investor agreement requiring each investor to deal only with the debtors, court documents state.

The company sought the extensions to renegotiate its collective bargaining agreements with union workers, formulate a backup marketing plan and identify potential plan sponsors, according to its motion.

The creditors committee claims the three-month extension, precluding the committee from filing its own plan of reorganization, would "push exclusivity past the time of any possible reorganization, virtually ensuring a liquidation caused by the debtors' own actions," the objection states.

Headed for liquidation

The committee asserts that the cases are on a course for liquidation, because:

• The debtors have not shared a plan with the committee nor with any of the debtors' unions;

• The debtors have no deal with the International Brotherhood of Teamsters and now face a nationwide strike;

• The debtors have not had a single negotiating session with the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union for more than two months and have failed to offer a response to the March 2 written proposal from the union; and

• "Having negotiated a form of investor agreement with the committee pursuant to their pledge to run an open investor process, the debtors then violated their pledge by secretly inserting the 'debtor lock-up.'"

Committee requests

"Given the debtors' inadequate progress during the last three months and their preparation for liquidation, the committee submits that no extension of exclusivity is warranted," the objection states.

If the court grants the extension, the committee wants the extension to end "upon the commencement of proceedings to sell all or substantially all of the debtors' assets," the objection states.

"And whatever it does with exclusivity, the court should enter an order finding the 'debtor lock-up' unenforceable," the objection states.

A hearing on the exclusivity extension is scheduled for 10 a.m. ET on April 17.

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

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