Hostess Brands to Go Out of Business
IRVING, Texas -- Hostess Brands Inc. has filed a motion with the U.S. Bankruptcy Court in White Plains, N.Y., seeking permission to close its business and sell its assets, including both brands and facilities. Its board of directors authorized the winding down of operations to preserve and maximize the value of the estate, the company said.
Bakery operations are suspended at all plants, but product deliveries will continue and Hostess Brands retail stores will remain open for several days in order to sell already-baked products.
The end of the iconic snack company follows a stalemate between Hostess and members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which initiated a strike last week. Hostess, which filed for bankruptcy in January, had asked employees to agree to an eight-percent pay cut, a 20-percent increase in healthcare costs, closure of 10 to 12 plants and changes to pension and workday provisions, reported Reuters.
"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," stated CEO Gregory F. Rayburn. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."
Hostess stated it is unprofitable under its current cost structure and that the offer would also give the unions a 25 percent ownership stake in the company, representation on the board of directors and $100 million in reorganized Hostess Brands' debt.
After the union rejected a last offer from the company in September, Hostess received court authority to unilaterally impose changes to the union's collective bargaining agreements on Oct. 13.
On Nov. 14, the company issued a warning that it would be forced to liquidate if enough employees did not return to work by 5 p.m. the next day.
Brands to be sold include Hostess, Drakes, and Dolly Madison, which sell products such as Twinkies, Ding Dongs, Ho Ho's, Sno Balls, Donettes and others. Additionally, bread brands such as Wonder, Nature's Pride, Home Pride and others will be sold.
Thirty-three bakeries, 565 distribution centers, 570 bakery outlet stores and approximately 5,500 delivery routes will be closed, Hostess stated.
On auction site eBay, resellers quickly began offering Twinkie packages for inflated prices. A box of 10 Twinkies with a starting price of $200,000 had yet to receive any bids.
Hostess listed assets of $981.6 million in its January bankruptcy filing, and in February it assessed the value of its patents, copyrights and other intellectual property at approximately $134.6 million without breaking down value by brands, according to Reuters. Its most recent operating report, filed with the bankruptcy court in late October, listed a $15.1 million net loss for the four weeks that ended in late September, primarily due to restructuring charges and other expenses.
The company's debtor-in-possession lenders have agreed to allow Hostess continued access to the $75 million financing facility that was put in place at the start of the bankruptcy cases to fund the sale and wind down process, subject to court approval, Hostess stated. The company also asked the court for authority to continue to pay employees whose services are required during the wind-down period.
The its court filing, Hostess stated that it will likely take approximately one year to wind down operations, and that it will need 3,200 employees to start that process but only around 200 after the first few months, according to Reuters.
Employees, customers and vendors can find more information at www.hostessbrands.info.