* 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
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
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.