A federal bankruptcy judge Wednesday approved Hostess Brands’ plans to wind itself down, officially putting Twinkies and other brands on the auction block.
Staff and wire reports
That also put in motion Hostess’ request to lay off 15,000 of the company’s 18,500 employees immediately, so that they could begin applying for unemployment benefits.
In granting Hostess’ motion, Judge Robert D. Drain of the Southern District of New York also cited the need for a quick and orderly shuttering of the company to avoid letting its assets molder. The alternative, a less-structured Chapter 7 liquidation, would be far worse.
“This estate will suffer substantial diminution if this wind-down plan is not quickly implemented,” he said. “It appears to me that the debtors have taken the right course.”
Drain’s motion spells the almost certain end of Hostess, an 82-year-old company that survived the Great Depression, several wars and countless low-carb diets. But the company, whose stable of sugary confections also includes Ho Hos and Ding Dongs, struggled for more than a decade with the public’s increasing fondness for lower-calorie, less-processed snacks.
The company, long based in Kansas City when it was called Interstate Bakeries, has plants in Lenexa, Emporia, Kan., and Boonville, Mo., that together employed about 800 people.
Conrad Boos, a union representative for the bakers in Lenexa, said the workers believe “there are buyers out there for this plant, and we think that if they buy our plant, we’re the best people to operate it.”
Boos said the union has no idea what kind of wages might be offered if and when the plant is reopened by a buyer.
“The interesting thing to us is that our union has the same agreements with other companies that seem to be able to make a profit at it,” he said. “But for whatever reason, Hostess couldn’t.”
At the bankruptcy hearing, which stretched for more than four hours, company executives and advisers espoused a simple message: Expedited sales of the failed baker’s brands will raise the maximum amount of money possible. And letting Hostess begin shutting its doors for good sooner would be kinder to employees.
Advisers sounded confident that the liquidation process, which is expected to take about a year, could yield big recoveries for creditors.
“Since we filed the motion, we have received a flood of inquiries and think there can be a healthy competition,” Heather Lennox, a lawyer for the company, said at the hearing.
The hearing followed a last-minute mediation session between Hostess and its bakery employees union Tuesday. That gathering, convened at the behest of Drain, was meant to resolve a nearly 2-week-old strike that company executive said fatally crippled its operations. But after several hours, the mediation talks collapsed.