US: Court gives Hostess green light for wind down

By Michelle Russell | 22 November 2012

Hostess, which owns brands including Twinkies, asked for court approval to wind up the business after a national strike it said had "crippled" the company

Hostess, which owns brands including Twinkies, asked for court approval to wind up the business after a national strike it said had "crippled" the company

Hostess Brands has won permission from the US Bankruptcy Court for the wind down of its business and the sale of its assets.

A New York judge yesterday (21 November) approved the company's motion for the wind down after the firm was unable to reach an agreement during 11th-hour talks with the Bakery, Confectionery, Tobacco and Grain Millers Union (BCTGM).

The company, which owns brands including Twinkies, asked for court approval to wind up the business last week after a national strike that it said had "crippled" the company. However, the bankruptcy court asked for the company and the BCTGM union to enter into mediation, which on Tuesday, Hostess confirmed had been "unsuccessful".

The wind down will mean the closure of 33 bakeries, 565 distribution centres, around 5,500 delivery routes, 570 bakery outlet stores and the loss of 18,500 jobs.

Hostess had already begun shutting down facilities last week after strikes by the bakery union hurt its ability to maintain normal production. Union officials have insisted the failure of successive managers and owners - and not the workforce's decision to launch strike action - was the reason for the company's woes.

The company said it intends to retain around 3,200 employees to assist with the initial phase 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," Hostess said. "The biggest component of the company's costs was its collective bargaining agreements that covered 15,000 of 18,500 employees."

Hostess is now actively calling for prospective bidders for the company's assets.

Sectors: Bakery, Financials

Companies: Hostess Brands

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