Hostess Judge Pondering Approval of Twinkie-Maker Wind-Down

U.S. Bankruptcy Judge Robert Drain in White Plains, New York, scheduled a hearing today to consider Hostess’s request to close and its bid to pay as much as $1.75 million in incentive bonuses to 19 senior managers during the wind-down.

Hostess Brands Inc., the bankrupt maker of Twinkies and Wonder Bread, is asking a judge for final approval of its plan to cease operations under current management, while members of the bakers’ union want a Chapter 11 trustee to oversee its wind-down.

U.S. Bankruptcy Judge Robert Drain in White Plains, New York, scheduled a hearing today to consider Hostess’s request to close and its bid to pay as much as $1.75 million in incentive bonuses to 19 senior managers during the wind-down.

Drain granted Hostess interim approval at a Nov. 21 hearing after last-minute mediation with its bakers’ union failed to resolve a contract dispute, leaving more than 18,000 jobs at risk. Drain had urged the mediation on Nov. 19 to keep the foundering company afloat.

Hostess, based in Irving, Texas, said it was forced to opt for liquidation after the union went on strike Nov. 9. The union, representing about 5,000 Hostess workers, walked out after Drain imposed contract concessions opposed by 92 percent of the union’s members. The union and a pension fund asked the judge to appoint a trustee to take control of the wind-down.

“A Chapter 11 trustee must be appointed to oversee the debtors’ orderly liquidation and protect the best interest of creditors,” according to a Nov. 27 filing by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union and the Bakery and Confectionery Union and Industry International Pension Fund.

Hostess said the proposal to appoint a trustee contains “serious legal deficiencies” and asked the judge to postpone consideration of the request.

Hostess sought court protection in January, its second time in bankruptcy, listing assets of $982 million and debt of $1.43 billion. The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos has endured years of declining sales as Americans turned to rivals’ snacks and breads, while ingredient costs and labor expenses climbed.

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