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Buyers woo Hostess as court OKs wind-down

- Associated Press - Thursday, November 29, 2012

NEW YORK — The future of Twinkies is virtually assured.

Hostess Brands Inc. got final approval Thursday in bankruptcy court for its wind-down plans, setting the stage for its roster of snack cakes to find a second life with new owners — even as 18,000 jobs will be wiped out.

The company said in court that it's in talks with 110 potential buyers for its brands, which include Cupcakes, Ding Dongs and Ho Hos. The suitors include at least five national retailers, such as supermarkets, a financial adviser for the company said. The process has been "so fast and furious" Hostess wasn't able to make its planned calls to potential buyers, said Joshua S. Scherer of Perella Weinberg Partners.

"Not only are these buyers serious, but they are expecting to spend substantial sums," he said.

The update on the sale process came as Hostess received approval in U.S. Bankruptcy Court in the Southern District of New York in White Plains to give its top executives bonuses totaling up to $1.8 million for meeting certain liquidation goals. The company says the incentive pay is needed to retain the 19 corporate officers and "high-level managers" during the wind-down process, which could take about a year.

Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The compensation would be on top of their regular pay.

The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring specialist earlier this year. Mr. Rayburn is being paid $125,000 a month.

Hostess was given approval on an interim basis for its wind-down last week, which gave the company the legal protection to fire 15,000 union workers. The company said the terminations were necessary to free workers to apply for unemployment. It is retaining about 3,200 employees to help in winding down operations, including 237 employees at the corporate level.

The bakers union, Hostess' second-largest union, has asked the judge to appoint an independent trustee to oversee the liquidation, saying the current management "has been woefully unsuccessful in its reorganization attempts."

Hostess said last week that it was getting a flood of interest from potential buyers for its brands. Mr. Scherer noted that it was a "once-in-a-lifetime opportunity" for buyers to snap up iconic brands without the burden of debt and labor contracts that would come with the purchase of Hostess as a company. Hostess sales, though declining over the years, come in at $2.3 billion to $2.4 billion a year.

In court Thursday, an attorney for Hostess noted that the company is no longer able to pay retiree benefits, which come to about $1.1 million a month. Hostess stopped contributing to its union pension plans more than a year ago.

In January, Hostess filed for its second Chapter 11 bankruptcy in less than a decade, citing steep costs associated with its unionized workforce.

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