CANDICE CHOI, AP Retail Writer
WHITE PLAINS, NY (AP) - A bankruptcy court judge is approving a request by Hostess Brands Inc. to begin winding down its operations.
The ruling came Wednesday after the maker of Twinkies and Ding Dongs failed in last-ditch negotiations to end a strike by its second-largest union.
Hostess now has the green light to terminate the jobs of its 18,000 workers and sell off its brands.
In court Wednesday, Hostess said it needed to begin the liquidation process quickly to take advantage of outside interest in its brands, which a banker said could fetch up to $2.4 billion. That's about how much they generate in annual sales.
Hostess, based in Irving, Texas, has been spending about $1 million a day in payroll without any income since it halted operations last week.
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Hostess posted the following information on the Hostess Brands Info website.
Irving, TX - Hostess Brands Inc. announced that the U.S. Bankruptcy Court for the Southern District of New York today approved its emergency interim motion for the orderly wind down of its business and sale of its assets.
Judge Robert Drain approved the motion after the Company and the Bakery, Confectionary, Tobacco and Grain Millers Union (BCTGM) were unable to reach an agreement during an 11th-hour mediation yesterday.
Hostess Brands is winding down the Company after a nationwide strike initiated by the BCTGM that commenced on November 9th crippled its operations at a time when the Company lacked the financial resources to survive a significant labor action.
Among other provisions, the Court order allows Hostess Brands to return excess ingredients and packaging; provides liquidity through an amended debtor-in-possession financing agreement and consensual use of cash collateral; and authorizes the Company to implement a non-executive employee retention plan to ensure the Company has the necessary personnel to implement the wind down.
Hostess Brands said it intends to retain approximately 3,200 employees to assist with the initial phase of the wind down. Employee headcount is expected to decrease by 94% within the first 16 weeks of the wind down. The entire process is expected to be completed in one year.
The wind down was necessitated by an inflated cost structure that put the Company at a profound competitive disadvantage. The biggest component of the Company's costs was its collective bargaining agreements that covered 15,000 of 18,500 employees.
Hostess Brands worked tirelessly to complete a reorganization of its business as a going concern, including spending the better part of 18 months negotiating with its key constituents to obtain a consensual agreement to lower costs to a sustainable level. The Company had obtained the support of its largest union, the International Brotherhood of Teamsters, and its lenders. However, the BCTGM leadership chose not to negotiate a new labor contract and instead, when presented with a final offer, launched a campaign to cripple the Company's operations and force it to liquidate.
The wind down means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes, 570 bakery outlet stores and the loss of 18,500 jobs.
Prospective bidders for the Company's assets should contact the following representatives:
¦Brands: Perella Weinberg at firstname.lastname@example.org
¦Assets: FTI Consulting at email@example.com
For employees whose jobs will be immediately eliminated, additional information can be found on the Hostess Brands Info website, which also contains a copy of the Company's wind down motion and information for customers and vendors.