Ho Ho, no!
Bankrupt Hostess Brands, the maker of popular snack cakes Twinkies, Ho Hos and Ding Dongs, is inching closer to liquidation.
Creditors rejected two proposals to buy the company out of bankruptcy as too low and are not optimistic about reaching a deal. Private-equity firm KPS Capital is one of two bidders that offered far less than the $860 million the creditors say they are owed, sources said.
Without a buyer, Hostess and its unions must come up with a reorganization plan if the company is to emerge from bankruptcy. Hostess filed for Chapter 11 in January, blaming its labor contracts and rising costs.
On Monday, a federal bankruptcy judge delivered a win for the company’s largest union, the Teamsters, when he denied the company’s motion to scrap its employment contracts.
Still, Judge Robert Drain took a dim view of the Teamsters’ pension funds, saying they were underfunded and needed to be restructured.
Hostess and the Teamsters have each submitted proposals for restructuring the company. Drain said both plans appeared to be largely viable options and urged the two sides to strike a compromise deal.
Hostess said its plan would allow the company to operate at a 10 percent profit margin, while the union said its plan would lead to a 9 percent profit margin.
Drain said if the two sides were unable to reach a deal, he might allow Hostess to submit a new restructuring plan.
He also sounded a cautionary note, saying the company was running out of time to present a reorganization plan.
Hostess has warned that it could be forced to liquidate if it can’t cut its pension costs. The company sent notices to its 18,000 workers warning them that it may liquidate in the next two months.