May 7 (Reuters) - Hostess Brands Inc, the maker of Twinkies
and Wonder Bread, has been given the go-ahead by a bankruptcy
judge to reject certain union contracts and modify some retiree
benefits, as it tries to work its way out of its second
bankruptcy in less than a decade.
Hostess can now reject some agreements with the Bakery,
Confectionery, Tobacco Workers and Grain Millers International
Union (BCTGM), as the company tries to cut crippling legacy
costs associated with its pension plans and massive debt levels.
However, contracts that had expired before the start of the
hearing, under which the union is still operating, cannot be
modified or rejected by the company, Judge Robert Drain said in
court documents published on Friday.
This means that certain employees or pensioners can retain
some benefits included in the expired contracts.
Privately held Hostess and the BCTGM union are arguing about
the expiry date of some of the agreements. A hearing to
determine the validity of the contested agreements will be held
on May 16, according to court documents.
As part of its reorganization, Hostess has withdrawn from
multi-employer pension plans, bringing down its cost of
long-term worker benefits and altering the terms of its various
collective bargaining agreements.
These steps are needed to raise money to turn around its
operations, the company said.
Hostess, founded in 1930, has about $860 million in debt. It
operates around 36 bakeries and employs about 19,000 people, a
majority of whom are members of 12 unions.
The company filed for its first bankruptcy in 2004, citing
declining sales, rising ingredient costs, excess capacity and
high worker benefit expenses. It tackled some issues - closing
bakeries and simplifying some union contracts -- but failed to
adequately deal with its huge pension and health obligations.
Recent bankruptcies, including that of AMR Corp, the parent
of American Airlines, have been marked by battles with trade
unions to terminate jobs and labor costs as they look to
drastically trim costs.
The case is In re: Hostess Brands Inc, U.S. Bankruptcy
Court, Southern District of New York, No. 12-22052.
For Hostess: Corinne Ball of Jones Day, Ira Herman of
Thompson & Knight and Paul Hoffmann of Stinson Morrison Hecker.
(Reporting by Tanya Agrawal)
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