* Attorney calls process 'credible and sad'
* Liquidators already lining up to bid
* Company veteran says brands 'certain' to sell
By Tom Hals
Nov 16 If Hostess Brands wins court approval to liquidate next week, it is likely to encounter substantial demand for its portfolio of iconic snack cakes and baked goods like Twinkies and Wonder Bread, investors and industry experts said on Friday.
Hostess said Friday morning it would seek to liquidate starting Tuesday after members of its bakers' union refused to end a strike. More than 18,000 people could ultimately lose their jobs as a result.
Experts who are familiar with Hostess Brands and its bankruptcy said the company's plan to close was not a tactic aimed at ending the bakers strike, which crippled production.
"I think it's credible and sad," said Greg Milmoe, an attorney with Skadden, Arps, Slate, Meagher & Flom. He said the company came a "hair's breadth" from liquidating during the last trip through Chapter 11 that began in 2004, which he oversaw.
Liquidators have been putting together proposals to land the assignment of selling the company's brands, which also include Drake's and Dolly Madison, as well as real estate, bakeries and equipment.
The brand names were likely to be more valuable once they are separated from inefficient factories and sold to non-union competitors, according to restructuring specialists.
"Can you imagine what Twinkies will go for? Jiminy!" said a person who did not want to be identified because his company planned to bid to be the liquidator. "And Wonder Bread? These are 100-year-old brands. They have to be worth a lot."
Jay Indyke of the Cooley law firm, who represented creditors in the Blockbuster video movie rental chain bankruptcy, said that when lenders to bankrupt companies see little hope of a company reorganizing they can push to liquidate to avoid spending their money without end.
Silver Point Capital led a group of investment funds that provided Hostess Brands' $75 million bankruptcy loan.
In a bankruptcy filing earlier this year, Hostess assessed the value of its trademarks and intellectual property at around $135 million. If the near-panic among junk food aficionados is any indication, it should be able to sell the brands easily.
"The brands are valuable and will certainly be sold," said David Pauker, a restructuring specialist with Goldin Associates who sat on the board of Hostess's predecessor Interstate Bakeries and has worked in the food industry.
"They will most likely be purchased by a competitor that will bolt the additional sales to a better and more efficient delivery system. The company itself won't survive."
Pauker said that whereas some of the Hostess bakeries would be sold, many or most would be closed and scrapped if the brands were sold to companies already operating bakeries in the same markets.
He attributed the company's failure in part to the refusal by the Teamsters union to make significant concessions on work rules during the company's previous bankruptcy filing in 2004, at a time when capital was available to substantially revamp the company's antiquated distribution system.
In the current bankruptcy case, the Teamsters reached a deal with the company but the bakers did not.