The future of Twinkies is virtually assured.
Hostess Brands Inc. got final approval for its wind-down plans in bankruptcy court Thursday, setting the stage for its roster of snack cakes to find a second life with new owners — even as 18,000 jobs will be wiped out.
The company also got approval to pay 19 executives a bonus of up to $1.8 million.
The company said in court that it’s in talks with 110 potential buyers for its brands, which include CupCakes, Ding Dongs and Ho Hos. The suitors include at least five national retailers such as supermarkets, a financial adviser for the company said. The process has been “so fast and furious” Hostess wasn’t able to make its planned calls to potential buyers, said Joshua Scherer of Perella Weinberg Partners.
“Not only are these buyers serious, but they are expecting to spend substantial sums,” he said.
On Nov. 16, Hostess shuttered its 33 U.S. production facilities, including the Dolly Madison plant in Columbus, after a strike by one of its largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International.
Striking workers, including about 160 members of Local 132 in Columbus, were protesting a new contract that forced upon the employees cuts to wages and pensions. The average worker was making about $15 per hour before the cuts.
The update on the sale process came as Hostess received approval in U.S. Bankruptcy Court in the Southern District of New York, in White Plains, N.Y., to give its top executives bonuses totaling up to
$1.8 million for meeting certain liquidation goals. The company says the incentive pay is needed to retain the 19 corporate officers and “high-level managers” during the wind-down process, which could take about a year.
Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The compensation would be on top of their regular pay.
The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring expert earlier this year. Rayburn is being paid $125,000 a month.
Larry Duncan, business agent for Local 132, said the bonus request reflects a leadership culture that predates the current Hostess executives.
“They take off the backs of the working people and give it to the rich,” he said.
Company leaders have taken away employees’ pensions and forced lower wages upon them, Duncan said, and now they want to pay themselves bonuses.
Meanwhile, many of the more than 200 local employees who have lost their jobs are still waiting for their first unemployment money after having lost their jobs just days before Thanksgiving, Duncan said.
Hostess was given approval on an interim basis for its wind-down last week, which gave the company the legal protection to immediately fire 15,000 union workers. The company said the terminations were necessary to free up workers to apply for unemployment. The company is retaining about 3,200 employees to help in winding down operations, including 237 employees at the corporate level.
The bakers union, Hostess’ second-largest union, has asked the judge to appoint an independent trustee to oversee the liquidation, saying that the current management “has been woefully unsuccessful in its reorganization attempts.”
Hostess said last week that it was getting a flood of interest from potential buyers for its brands, which also include Devil Dogs and Wonder bread. The company has stressed that moving quickly is necessary to capitalize on the outpouring of nostalgia sparked by its liquidation.
“The longer these brands are off the shelves, the less they’re going to be valued,” Scherer said in court Thursday. Last week, he noted that it was a “once-in-a-lifetime opportunity” for buyers to snap up iconic brands without the burden of debt and labor contracts that would come with the purchase of Hostess as a company. Although Hostess sales have been declining over the years, they still come in at between $2.3 billion and $2.4 billion a year.
In court Thursday, an attorney for Hostess noted that the company no longer is able to pay retiree benefits, which come to about $1.1 million a month. Hostess stopped contributing to its union pension plans more than a year ago.
The company’s demise came after years of management turmoil, with workers saying the company failed to invest in updating its products. In January, Hostess filed for its second Chapter 11 bankruptcy in less than a decade, citing steep costs associated with its unionized workforce.
Toward the end of the hearing Thursday, a man who said he’d worked at Hostess for 34 years stood to give his objections to the wind-down plan, saying creditors shouldn’t be given money from brand sales when the company hasn’t been paying into workers’ pension funds.
“I have traveled pretty far to get here,” he said, noting that many of his co-workers weren’t aware of the hearing or didn’t know how to get there. “I just wanted to be heard.”
The Associated Press contributed to this report.