• 05-OCT-2012

  • SOURCE: Hostess Brands

Bankruptcy Court Approves Hostess Brands' Request to Impose Concessions on Baker's Union

Judge Robert D. Drain of the United States Bankruptcy Court Southern District of New York today approved Hostess Brands' motion to impose changes to collective bargaining agreements (CBAs) for the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union (BCTGM). It also granted the Company's motion to impose virtually identical changes on 5 additional smaller unions, though only two had contested the Company's motion.

Drain approved motions that allow Hostess to impose changes to both those BCTGM CBAs that are still in effect and to another 18 that expired earlier this year. The approval for the 18 expired CBAs was granted on an interim basis to allow both parties to continue bargaining at a later date. The BCTGM represents 6,600 Hostess employees and is the Company's second largest union behind the International Brotherhood of Teamsters.

One of the key elements of the trial was whether a third party had recently stepped forward with a viable offer to acquire the entire company. Were this the case, it would have had a dramatic effect on the case by providing an alternative to the current exit strategy, whereby the Company's existing lenders have agreed to fund the Company's exit from Chapter 11 in exchange to concessions from all employees.

In a letter to its membership dated Sept. 4, the leadership of the BCTGM stated that:
"We believe there are parties … who may be prepared to invest in or purchase the Company or a significant portion of the baking facilities if the Proposal is declined." and "... there may be other operators who may purchase individual plants and provide collective bargaining agreements similar to those that have been in place at the Company."

But testimony at today's trial clearly refuted this claim and confirmed the Company's assertion that there are no viable bidders waiting to purchase the entire company.

Hostess CEO and Chairman Gregory F. Rayburn and Josh Scherer of Perella Weinberg, the Company's financial adviser, testified that the only recent offer came from an investment bank that had no financing and whose offer was far from viable, in part because it called for the dissolution of union drivers.

"It's an idea that was put together by an investment banker with no committed financing," Scherer testified. "This idea is simply not feasible. It cannot be implemented."

Drain agreed: "The evidence is crystal clear from the testimony of Mr. Rayburn and Mr. Scherer that there is no 3rd party alternative before the debtors at this time."

Only two of the smaller unions today contested the Company's motion to impose changes to their labor contracts.

Available content includes soundbites from Greg Rayburn, Chairman & CEO, Hostess Brands, and B-roll.

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