Hostess Brands is looking for some last- minute financial incentives for its executives as it completes the liquidation process.
Hostess, maker of snack cakes, breads, and other foods, was forced into bankruptcy last week following a labor dispute that crippled the business. The company plans to sell its brands and to help make the process less painful for its executive team, it is asking a bankruptcy judge to approve up to $1.75 million in bonuses. The money is needed, according to Hostess, to pay its top- level managers so that they will stay with the company long enough to oversee the liquidation.
Hostess has set several stipulations on the bonuses that include completion of specific tasks within a strict time frame. If managers complete the tasks and follow the rules, then Hostess will distribute the bonus money. Hostess CEO Greg Rayburn would not be eligible for a bonus, but other top executives would if the deal wins approval.
The idea that upper management should receive bonuses from a company that went bankrupt under their leadership is nothing new, but it still has critics crying foul. Hostess feels the deal is fair and points out that the bonuses are small compared to other companies in similar financial straits. Still, critics assert that no top executive at Hostess should receive any type of bonus considering the failure to reach an agreement with labor. On top of the issue with bonuses, Hostess is also asking the court to allow it to stop paying additional retiree benefits to the tune of $1.1 million a month.
U.S. Bankruptcy Court judge Robert Drain has been assigned to the case and will have to make the decision on the bonuses and retirement plan. Even more importantly, Drain will have to decide if Hostess Brands can sell the rights to its popular brands, which include Twinkies, Ding- Dongs, Ho- Hos, Sno- Balls, Home Pride bread, and many others.
Hostess has already been approached by many companies to purchase its popular lineup of snack and other foods. Some of the interested parties include Entenmann’s and Sara Lee, among others. The Hostess brand name has obvious value and a large enough sale price could be enough to help the liquidation process run more smoothly, pay off creditors, and possibly leave a small amount of cash to return to shareholders.
Hostess Brand’s bankruptcy and eminent liquidation will result in about 18,000 workers losing their jobs, but with so much interest in purchasing the brand (more than 100 companies and investors have made inquiries), it looks like the Hostess Twinkie and other iconic snacks will live on. It all comes down to the decision by Judge Drain, which is expected shortly.
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