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Twinkies maker Hostess lives for another day, as company plans to mediate with striking union (Read

By Associated Press, Published: November 19
WHITE PLAINS, N.Y. — Twinkies will live to see another day.

Hostess Brands Inc. and its second largest union agreed on Monday to try to resolve their differences after a bankruptcy court judge noted that the parties hadn’t gone through the critical step of private mediation. That means the maker of the spongy cake with the mysterious cream filling won’t go out of business yet.

The news comes after the maker of Ho Ho’s, Ding Dongs and Wonder Bread last week moved to liquidate and sell off its assets in bankruptcy court. Hostess cited a crippling strike started on Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents about 30 percent of Hostess workers.

“Many people, myself included, have serious questions as to the logic behind this strike,” said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. “Not to have gone through that step leaves a huge question mark in this case.”

The mediation talks are set to take place Tuesday, with the liquidation hearing set to resume on Wednesday if an agreement isn’t reached. Jeff Freund, an attorney for the bakers union, said any guess as to how the talks will go would be “purely speculative.”

In an interview following the hearing, Hostess CEO Gregory Rayburn said that there is enormous financial pressure to come to an agreement with the union by the end of the day Tuesday.

He noted that it’s costing Hostess about $1 million a day in payroll costs alone to stay alive, with the money mostly going toward management to unwind the company. About 18,000 workers were sent home Friday after the company shuttered its 33 plants, meaning no sales are being generated.

“We didn’t think we had a runway, but the judge just created a 24-hour runway,” said Rayburn, who added that even if a contract agreement is reached, it’s unclear whether all Hostess plants will get up and running again.

Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of Americans, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell its assets and wind down its business.

The company, which is in its second bankruptcy in less than a decade, had said that it was saddled with costs related to its unionized workforce. It brought on Rayburn as a restructuring expert in part to renegotiate its contract with labor unions.

Hostess, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would’ve slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. The baker’s union rejected the offer and decided to strike.

By that time, Hostess had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakers union to hold a secret ballot on whether to continue striking. Although many workers in the bakers union decided to cross picket lines this week, Hostess said it wasn’t enough to keep operations at normal levels.

Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The bakers union said the company’s demise was the result of mismanagement, not the strike. It pointed to the steep raises executives were given last year as the company was spiraling down toward bankruptcy.

The company’s announcement last week that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy cakes turned up for sale online for hundreds of dollars.

Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess’ sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.

Posted by Admin on 11/20 at 03:40 PM
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Hostess Says It Will Liquidate If Strikers Don’t Return (Read More…)

By Dawn McCarty and Bill Rochelle on November 15, 2012

Hostess Brands Inc., the maker of Wonder bread and Twinkies, said it will shut down and liquidate unless enough members of its striking bakery workers’ union return to work today to resume normal operations.

The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike Nov. 9 after a bankruptcy judge in White Plains, New York, imposed contract concessions that 92 percent of the union’s workers rejected.

“We don’t have the financial wherewithal, nor the manpower, to sustain operations through a strike,” Chief Executive Officer Gregory Rayburn said today in an interview with Betty Liu on “In The Loop” on Bloomberg Television.“Frankly, customers won’t sit back and tolerate out-of-stock positions in their stores.”
Hostess closed three of its 36 plants permanently Nov. 12, blaming the strike, and about 13 plants are operating “unsustainably” because of worker shortages,

Rayburn said. The bakers union has “made no demands, and in fact they stopped returning our calls about a month ago,” he said.

Rayburn yesterday said Hostess will file court papers tomorrow asking for authorization to shut the company down entirely on Nov. 20. It will ask the judge to hold a liquidation hearing Nov. 19, he said.

Liquidation would mean the loss of 18,000 jobs, Rayburn said. It’s now up to the bakery workers “to decide if they want to call off the strike and save the company, or cause massive financial harm to thousands of employees and their families,”Rayburn said in a statement.
Affected Plants

Hostess previously said that the strike was affecting 23 of 36 plants. The union, which said it represents about 5,000 Hostess workers, went on strike over what it called the“unilateral imposition of a horrendous contract.”

“Despite Greg Rayburn’s insulting and disingenuous statements of the last several months, the truth is that Hostess workers and their union have absolutely no responsibility for the failure of this company,” BCTGM International Union President Frank Hurt said today in a statement. “That responsibility rests squarely on the shoulders of the company’s decision makers,” Hurt added.

The Teamsters Union voted to accept a new contract with 8 percent in wage concessions and 17 percent in benefit reductions.

Voluntary Concessions

A reorganization plan filed in the court last month can’t be implemented without selling some assets or obtaining new financing. The Teamsters and the bakery workers’ union made voluntary concessions in the first Chapter 11 reorganization, which began in 2004.

Hostess, based in Irving, Texas, filed under Chapter 11 for a second time in January, listing assets of $982 million against liabilities totaling $1.43 billion.

The new case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains). The prior bankruptcy was In re Interstate Bakeries Corp., 04-45814, U.S. Bankruptcy Court, Western District of Missouri (Kansas City).

Posted by Admin on 11/20 at 03:28 PM
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