By Martinne Geller and Jonathan Stempel
NEW YORK, Nov 21 (Reuters) - Hostess Brands Inc on Wednesday
appeared headed toward a liquidation, though its lawyers and
advisers expressed optimism that they will find new homes for
many of its iconic brands, which include Twinkies, Drake's cakes
and Wonder Bread.
U.S. Bankruptcy Judge Robert Drain in White Plains, New
York, held a hearing to consider initial approval of the
82-year-old company's plan to wind down over the next year.
Drain's last-ditch mediation to resolve Hostess' differences
with its striking bakers' union had broken down on Tuesday.
"Unfortunately, we're faced now with the matters that were
originally scheduled for Monday and were adjourned to today, to
deal with the issues facing the debtor in their need to preserve
and ... maintain their value in a liquidation scenario," Drain
said.
Heather Lennox, a lawyer for Hostess, told the judge that
the company has received a "flood of inquiries" from potential
buyers for several brands that could be sold at auction and
expects initial bidders to surface within a few weeks.
Joshua Scherer, a partner at Perella Weinberg Partners,
which is advising Hostess, said the company was in "active
dialogue" over its Drake's brand with one "very interested"
party that had toured a New Jersey plant on Tuesday.
He said regional bakeries, national rivals, private equity
firms and others have also expressed interest in various brands
and that more than 50 nondisclosure agreements have been signed.
"These are iconic brands that people love," Scherer said.
As for the value of the company, Scherer said Hostess could
be worth $2.3 billion to $2.4 billion in a normal bankruptcy, an
amount equal to its annual revenue. It also has about $900
million of secured debt and faces up to about $150 million of
administrative claims.
But Scherer expects a discount in this case because plants
have already been closed and Hostess' value could fall further
if the liquidation were dragged out.
"I've had buyers tell me, 'Josh, the longer it takes ... the
less value I'm going to be able to pay you,'" he said.
Hostess decided to liquidate on Nov. 16, saying it was
losing about $1 million per day after the Bakery, Confectionery,
Tobacco and Grain Millers Union, representing close to one-third
of its roughly 18,000 workers, went on strike a week earlier.
The bakers union walked out after Drain authorized Hostess
to impose pay and benefit cuts, which the International
Brotherhood of Teamsters, Hostess' largest union, had accepted.
Hostess has about 33 plants, plus three it decided to close
after the strike began, as well as 565 distribution centers and
570 bakery outlet stores.
As part of a liquidation, the Irving, Texas-based company
would immediately terminate about 15,000 employees.
It said it expects to keep about 3,200 workers to help shut
its properties and prepare them for sale, but that only
approximately 200 people would remain employed by late March.
Hostess had filed for Chapter 11 protection on Jan. 11, its
second bankruptcy filing in less than three years.
The case is In re: Hostess Brands Inc et al, U.S. Bankruptcy
Court, Southern District of New York, No. 12-22052.
(Additional reporting by Adam Kerlin and Peter Rudegeair)
Follow us on Twitter @ReutersLegal | Like us on Facebook