Phoenix Bankruptcy Law News

Hostess Liquidation Plan Approved; Tastykake Maker May Buy Brands

It's the end of an era in the world of mass-produced snack cakes. Bankruptcy Judge Robert Drain has approved Hostess' liquidation plan, giving the company the go-ahead to begin the wind-down.

Following a strike by Hostess' baker's union, Drain ordered the company and the union to enter into mediation. However, the parties failed to reach a compromise regarding new labor contracts.

Now Hostess plans to sell off its assets and wind down over the course of a year, The Wall Street Journal reports.

The threat of liquidation has loomed large ever since the company filed for Chapter 11 bankruptcy earlier in the year. Hostess originally planned to pay off its debts by cutting wages and benefits. However, that strategy was met with stiff opposition from several workers unions.

The baker's strike was ultimately the death knell for Hostess. All of Hostess' 18,500 workers will now lose their jobs, some immediately and others in the upcoming months. "This is a tragedy," Hostess attorney Heather Lennox told the court, according to the Journal.

However, it's not all bad news for the company's employees. Judge Drain has approved up to $4.36 million in retention bonuses for workers who will remain with the company during the wind-down.

The main order of business during the wind-down will be finding buyers for the company's assets. That shouldn't be too hard. A number of companies have already expressed interest in acquiring Hostess' product lines.

While many of the companies are foreign-based, some of Hostess' national competitors are in the running as well. Georgia-based Flowers Foods, maker of Tastykake snack cakes, has renegotiated its lending terms to allow it access to additional cash. That's likely a sign that the company wants to bid on Hostess' assets.

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