Twinkies maker facing end, but life seen for brands
Hostess Brands Inc. on Wednesday appeared headed toward a liquidation, though its lawyers and advisers expressed optimism that they will find homes for many of its iconic brands, which include Twinkies, Drake's cakes and Wonder Bread.
U.S. Bankruptcy Judge Robert Drain in White Plains, N.Y., held a hearing to consider initial approval of the 82-year-old company's plan to wind down during the next year.
Drain's last-ditch mediation to resolve Hostess' differences with its striking bakers' union broke down on Tuesday.
“Unfortunately, we're faced now with the matters that were originally scheduled for Monday and were adjourned to today, to deal with the issues facing the debtor in their need to preserve and ... maintain their value in a liquidation scenario,” Drain said.
Heather Lennox, a lawyer for Hostess, told the judge that the company has received a “flood of inquiries” from potential buyers for several brands that could be sold at auction and expects initial bidders to surface within a few weeks.
Joshua Scherer, a partner at Perella Weinberg Partners, which is advising Hostess, said the company was in “active dialogue” over its Drake's brand with one “very interested” party that had toured a New Jersey plant on Tuesday.
He said regional bakeries, national rivals, private equity firms and others have expressed interest in various brands and that more than 50 nondisclosure agreements have been signed.
“These are iconic brands that people love,” Scherer said.
As for the value of the company, Scherer said Hostess could be worth $2.3 billion to $2.4 billion in a normal bankruptcy, an amount equal to its annual revenue. It has about $900 million of secured debt and faces administrative claims of as much as $150 million.
But Scherer expects a discount in this case because plants have already been closed and Hostess' value could fall further if the liquidation is dragged out.
“I've had buyers tell me, ‘Josh, the longer it takes ... the less value I'm going to be able to pay you,'” he said.
Hostess decided to liquidate on Nov. 16, saying it was losing about $1 million per day as a result of the Bakery, Confectionery, Tobacco and Grain Millers Union — representing nearly one-third of its 18,000 workers — going on strike a week earlier.
The bakers union walked out after Drain authorized Hostess to impose pay and benefit cuts, which the International Brotherhood of Teamsters, Hostess' largest union, had accepted.
Hostess has about 33 plants, plus three it decided to close when the strike began, 565 distribution centers and 570 bakery outlet stores.
As part of a liquidation, the Irving, Texas-based company would terminate about 15,000 employees.
The company said it expects to keep about 3,200 workers to help shut its properties and prepare them for sale, but that only just a few people would remain employed by late March.
Hostess filed for Chapter 11 protection on Jan. 11, its second bankruptcy filing in less than three years.
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