Nov 19 Hostess Brands Inc, the maker of the
iconic Twinkies snack cake, will square off in a bankruptcy
court on Monday against an agent of the U.S. Justice Department,
who says the wind-down plan is too generous to management.
The U.S. Trustee, an agent of the U.S. Department of Justice
who oversees bankruptcy cases, said in court documents it
opposed to the wind-down plan because Hostess planned improper
bonuses to company insiders.
The 82-year-old Hostess wants permission to pay senior
management a bonus of up to 75 percent of their annual pay so
they will stay on and help wind-down the business.
The U.S. Trustee, Tracy Hope Davis, planned to ask New York
Bankruptcy Court Judge Robert Drain at Monday's afternoon
hearing to appoint an independent trustee to oversee the sales
of the company's assets.
Several unions also objected to the company's plans, saying
they made "a mockery" of laws protecting collective bargaining
agreements in bankruptcy. The Teamsters, which represents 7,900
Hostess workers, said the company's plan would improperly cut
the ability of remaining workers to use sick days and vacation.
"This would all be aimed at increasing the potential
recovery of secured lenders," said the court filing by the
The company, which employs 18,500, said on Friday its
operations had been crippled by a bakers strike and winding down
operations was the best way to preserve its dwindling cash.
Hostess suspended operations at all of its 33 plants across the
United States last week as it moved to start selling assets.
Twinkies, Wonder Bread and the company's other well-known
brands are likely to be sold to rivals, and the money raised
will be used to repay Hostess Brands' creditors.
Those products, particularly the golden, cream-filled
Twinkies cakes, are deeply ingrained in American pop culture and
have long been packed in school children's lunch boxes.
Hostess blamed heavy debt and burdensome wage and pension
obligations for its financial woes. It said a strike by members
of the Bakery, Confectionery, Tobacco Workers and Grain Millers
International Union (BCTGM), which began Nov. 9, was part of a
long series of battles between labor and management that
contributed to the company's inability to restructure its
finances and produce and deliver products at several facilities.
But union officials and line workers said last week that
union workers had already agreed to a series of concessions over
the years and the company had failed to invest in brand
marketing and modernization of plants and trucks, instead
focusing on enriching owners such as private equity firm
Ripplewood Holdings and hedge funds Silver Point Capital and
Monarch Alternative Capital.
Officials at the three firms declined to comment.
On Monday, Flowers Foods Inc, which is seen as a
potential suitor for some of Hostess's brands, amended and
extended its $500 million loan facility, giving it greater
financial flexibility. It did not say whether the change was
related to a potential bid for Hostess or any of its brands.
"This amendment to our credit facility positions us to take
advantage of an assortment of opportunities as we work to
achieve our expansion goals," said Flowers Chief Financial
Officer R. Steve Kinsey.
Private equity group Metropolous & Co, the owner of Pabst
Brewing Co., has already expressed interest in Hostess.