View the Video: An 11-Year-Old’s Ode to Hostess
At least two surprising offers may be heard in the Southern District of New York Bankruptcy Court of Judge Robert Drain Thursday, Nov. 29, as Hostess Brands, Inc., headquartered in Irving, its private investors, union representatives and other parties interested in the pending liquidation appear at what is supposed to be a final hearing on the shutdown request.
The motions are, reportedly, offers to purchase the company. The latest, filed Nov. 26, is from Cookies & Sweets, incorporated by James Davis of Pine Bluff, Ark. A two-page document was filed by a New York law firm, which also notes that the company “is waiting for specific counsel for this case.” According to a story in Wednesday’s “Arkansas Business,” the company is “not currently in production,” and its status is “listed as revoked” by the state of Arkansas.
The motion states that “Upon approval Hostess Brand will be headquartered in Detroit Michigan, a union friendly state, which will provide more opportunity for growth.”
The first motion purporting to make an offer for Hostess Brands was filed Nov. 19 by Hurst Capital, LLLP, of Sarasota, Fla., by Austin and Zach Hurst, who are known as the “Tech Twins,” but admit they have no experience with baking companies nor with deals of this magnitude.
Other, more serious offers have also been forthcoming, according to a story published by the Dallas Morning News on Wednesday. The paper reports that Gregory Rayburn, Hostess CEO, confirmed that the company has signed more than 80 confidentiality agreements with qualified, interested parties. Rayburn refused, however, to discuss details or time scheduled.
Other motions have also been filed: at least two deal with the issue of whether the existing Hostess management team should be allowed to handle the closing and liquidation procedures or, alternatively, if the judge will appoint an outside individual or firm to act as a trustee for the closure.
Judge Drain approved the company’s request to move forward with its plans to close all facilities and sell off its assets at an interim hearing the Wednesday before Thanksgiving. He had previously mandated a last-minute attempt at mediation between the company and the striking union, but those efforts were not successful. Hostess shuttered its bakeries and cancelled its deliveries on Friday, Nov. 16, following a weeklong strike at many company bakeries, a move which management claimed crippled its operations and its ability to recover.
Only members of one union, the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) of the AFL-CIO, actually went on strike, although some other union workers refused to cross picket lines. However, 11 other unions had agreed to the company’s requested concessions in order to move from bankruptcy toward profitability. The largest number of workers was represented by the Teamsters Union, which had urged bakers to agree to a “final and best offer” by the company.
BCTGM has entered a motion calling for an “independent outside professional, called a Chapter 11 trustee,” to be named to supervise the closing and liquidation, according to an article published yesterday in the Daily Bankruptcy Review. And, it was reported late Wednesday that a pension fund board has added its name to that request.
Previously, a similar motion had been filed by U.S. attorney ad trustee Tracy Hope Davis asking that the proceedings be reclassified as a Chapter 7 (Liquidation) in order the protect the interests of creditors. The judge ruled that, “at least for now, it was in the best interest of creditors and employees for the case to remain in Chapter 11 and the liquidation be administered by current management,” according to a Hostess Member Update published on the Teamsters Website.
It is noted that “As part of the wind down program approved by the court,” during the initial two months a small percentage of Hostess workers (approximately 300 Teamsters) may be asked to continue to work for the company on an interim basis.”
The published update also notes, “Among the relief approved on an interim basis: All employees, union and non-union (excluding senior management employees) who work during the wind down period will receive an extra payment equal to 25 percent of their wage compensation during the wind down period.”
The dollar amount of compensation for those employees who supervise the wind down, in particular management employees and key executives, has been contested by the unions. A set-aside amount of $1.75 million for top echelon executive during the liquidation process which by all accounts could take up to one year was deemed wasteful and excessive.
Hostess CEO Rayburn has had little comment over the past two weeks, other than to express regret on the Hostess Brands official website. However, both he and company attorneys have confirmed that a number of inquiries have been received from interested buyers for specific brands produced by the 82-year-old company.
Listed by analysts as having interest in acquiring part of the Hostess Brands family of products have been Mexican giant Grupo Bimbo, with American headquarters in Horsham, Pa., Flowers Foods, McKee Foods, ConAgra, Metropoulos & Co., the private equity owner of Pabst Brewing, and Weston Foods of Canada which produces Wonder Bread in that country. Interest has been confirmed only by Metropoulos and Flowers Foods.
One other twist – a Crowdfunding effort has been initiated to raise equity capital “to put control back in the hands of the American people.”