Hostess Brands, Inc., of Irving, Texas, took another step today down the road to complete liquidation, returning once again to face Judge Robert Drain of the Bankruptcy Court of the Southern District of New York in White Plains. The judge, as expected, once again offered the approvals sought by the company which had declared last November that it could no longer seek to remain in business through reorganization. Today’s action accounts for approximately $800,000 of asset sales for the beleaguered company’s coffers.
Specifically, on March19 Judge Drain gave his blessing to the sales of three groups of former Hostess Brands products to three separate buyers, Flowers Foods of Thomasville, Ga.; Grupo Bimbo, the Mexican giant baking company with U.S. headquarters in Horsham, Penn.; and a joint offer from Apollo Global Management, LLC, and C. Dean Metropoulos & Co.
The judge also ruled on several other motions which had been filed in the bankruptcy proceedings since the previous court date, including payment of interim fees and expenses related to the bankruptcy and objections to the proposed sales filed by at least one union interesting in protecting workers’ rights.
According to one news report of the proceedings, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union withdrew its objection following a change of wording to the sales contract between Hostess Brands and Flowers Foods.
In a statement to the media, BCTGM International President David B. Durkee noted:
“Throughout this arduous process, our membership has believed that the key to these brands’ survival was strong, new ownership and a sustainable business model. Indeed, new ownership has signaled a clear intent to accelerate this process and return products back to the shelves as soon as this summer. We share the enthusiasm, energy and passions exhibited by new ownership, and believe our highly-motivated and skilled workforce will serve as indispensable partners in the seamless re-opening of factories.
“In this way, new ownership can proudly demonstrate their commitment to preserving middle-class jobs while delivering on their promise to consumers.”
Another objection to the Flowers offer was filed by a U.S. attorney addressing environmental concerns. It had been previously reported that the companies involved were addressing issues dealing with the enforcement of environmental laws and regulations.
The three sales, if they successfully navigate the remaining governmental, regulatory and financial requirements of their separate contracts, should be set to be finalized within the next 30 to 45 days, paving the way for certain products to once again be offered for sale to the public. There has, until now, been little discussion of the timetable leading to renewed production of such brands as Wonder Bread and Beefsteak Rye Breads. Notably, it has been Twinkies, the iconic cream-filled snack cake which was the butt of so many jokes while it was produced, which has been the focus of attention during this second, prolonged bankruptcy saga.
Hostess Brands, Inc., was born out of a previous bankruptcy proceeding from which its predecessor emerged in 2009. The previous entity, made up of a varied assortment of baked products, some with very long histories and loyalties, was once the largest in the country. However, and perhaps because of its diverse product lineup, the company never was able to completely rise above its problems and emerged from its first bankruptcy with more debt than it had when it filed for protection. This second bankruptcy, filed in January 2012, seemed to be heading in the same direction.
Analysts have postulated that the bonus couched in the current liquidation may be a revival of enthusiasm for many of the brands on the part of the new owners, a commitment to making a new venture profitable, and a renewed interest in many of the products on the part of the public. To that end, the joint venture entity comprised of Apollo and Metropoulos has vowed to have Twinkies and some of the other snack cake products “back on the shelves” by summer.
Although there has been no announcement from Flowers regarding production schedules, it is widely acknowledged that the longer the specific brands remain off the shelves the harder it will be to re-establish their former share of the market. Flowers, in particular, has been forthcoming about its intention to increase sales in the parts of the country where it formerly did not have a presence, notably the Southwest and Western states, as well as the entire mid-section of the nation.
Two other groups of brands, Drake’s Cakes and the Northwest Breads Group, face a final return to court on April 9 to receive their expected blessing from the judge. Those two sales, to McKee Foods of Collegedale, Tenn., and United States Bakery, Inc., of Portland, Ore., respectively, would add an additional $60 million, approximately, to the total dollar amount received.
Hostess Brands CEO Gregory Rayburn said last week that with the sales of the major brands, the primary work of liquidation will have been accomplished, including his own. Rayburn, who was brought on as a restructuring expert only mid-2012, also envisions up to an additional $100 million coming to the company through sales of remaining bakeries, equipment and smaller assets. In November, it was stipulated that the final liquidation of the company would take as much as 12 to 14 months. It was also anticipated by Hostess Brands’ advisers that the sell-off might garner as much as $1 billion.
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