Jan 23 Hostess Brands Inc's bid to
sell its bread brands to Flowers Foods Inc has hit a
roadblock with unsecured creditors objecting to the break-up
fees Flowers is entitled to for being appointed as the initial
or "stalking horse" bidder.
The break-up fees is too high and contains an unusual "most
favored nation" provision that gives Flowers a windfall without
conferring an equal benefit to Hostess, a committee representing
unsecured creditors said in its objections filed on Tuesday.
Flowers on Jan. 11 agreed to buy Wonder and other well-known
bread brands from Hostess for $360 million as well as its
Beefsteak brand for another $30 million.
The Flowers purchase is subject to higher bids at a
court-supervised auction and the company is entitled to a
break-up fee of $12.6 million for the bread brands and $1.05
million for the Beefsteak brand.
The committee said the fee is too high and will hamper
bidding and wants the bankruptcy court to reduce the break-up
fee to $10 million for the bread brands and $810,000 for the
Hostess, known for its Twinkies snack cakes, in November
decided to shut down its baking business and liquidate after a
strike by its bakers union crippled the 82-year-old company.
The unsecured creditors committee also said in its
objections the "most favored nation" provision is highly unusual
and inappropriate as it alters established market practice and
gives Flowers additional financial windfall in case of future
events that may take place.
Under the provision, if Hostess were to propose another sale
for a price exceeding $10 million with a break-up fee of more
than 3.5 percent, Flowers would be entitled to an additional
cash payment equal to the difference between the amount of the
break-up fee calculated at 3.5 percent rate and the higher rate.
The case is In re: Hostess Brands Inc et al, U.S. Bankruptcy
Court, Southern District of New York, No. 12-22052.