Bankrupt Hostess Brands is hoping to reach a deal with its unions that will allow it to sell individual brands to raise cash, The Post has learned.
The maker of Twinkies, Ding Dongs and Wonder Bread, which is on its second trip through bankruptcy court and is fighting for survival, is negotiating with its unions to cut pensions costs.
While the pensions remain the key sticking point, the company is also seeking permission from its union to sell brands, such as Hostess CupCakes, Drake’s and Dolly Madison.
Hostess, based in Irving, Texas, filed for “Chapter 22” bankruptcy protection in January, just three years after it emerged from a previous Chapter 11.
While America’s largest bakery makes money off its snacks division, it is losing dough on its bread business, including Wonder Bread and Nature’s Pride, according to a sources with knowledge of its finances.
The company has wanted to sell some of its individual snack brands for years, while the unions have been concerned that shedding profitable assets will leave the remaining company even more vulnerable to collapse.
However, Hostess’ unions are willing to consider the sale of brands if the proceeds are used to strengthen the remaining business, a source close to the talks said.
Indeed, shedding brands may be Hostess’ best bet for reaching a compromise with its unions and avoiding liquidation.
The company has asked a bankruptcy judge to slash its health-care and pension obligations to employees of the Teamsters and a bakers union, saying it’s losing market share and “hundreds of millions of dollars each year.”
Hostess has extended until April 17 a hearing in which the bankruptcy judge will decide whether it has the right to scrap its collective bargaining agreement and its pensions.
“The sole focus of discussions among the company, its unions and lenders in recent weeks has been pensions, with no other extraneous topics discussed,” said a Hostess spokesman.
If Hostess wins, the Teamsters have already authorized a strike vote. Should it lose, the company’s senior creditors may refuse to fund the business any longer and liquidate it, a move that would impact close to 18,000 workers, sources said.
Hostess has $75 million in debtor-in-possession financing, which the company said is “sufficient cash to carry it through its anticipated emergence from Chapter 11 at the end of July.”
Last year, Hostess hired JPMorgan to find buyers for some of its more profitable brands, but the process failed because buyers did not want to assume any pension liabilities, sources said.
Now that the company is in bankruptcy, a buyer likely would be able to acquire a brand and not assume current and unpaid pension liabilities, assuming the unions agree, a source said.
Potential buyers for Hostess assets include: Bimbo Bakeries, which makes Entenmann’s baked goods; McKee Foods, which make Little Debbie snack cakes; and Flowers Foods, the owner of Tastykakes.
Meanwhile, several sources are griping about the costs to restructure the company. Hostess has paid banker Perella Weinberg $1.2 million and law firm Jones Day $6.3 million.