Hostess Bankruptcy 2012: '24-Hour Runway' to Save Twinkies and 18,000 Jobs
Hostess' bankruptcy in 2012 will be avoided because a judge urged the financially unstable snack conglomerate to negotiate with the Bakery, Confectionery, Tobacco Workers and Grain Millers Union for an agreement. The decision came Monday, which many sighs of relief that Twinkies, a staple snack food of the company, would not disappear.
Hostess Brands bankruptcy in 2012 would put the jobs of their 18,500 workers at risk, as the 82-year-old company risked stumbling while emerging from fiscal calamity. A judge quelled fears this week, telling the labor union and company to talk things out.
"I'm giving the union, as well as the debtor and their lenders, a chance to work out their issues in private," Judge Robert D. Drain of the Federal Bankruptcy Court for the Southern District of New York told The New York Times. "If they don't take it, it's not that the issues won't be worked out. They will, but it will be done in public and in an expensive way."
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Because of the debts the company had run up in recent years, it would have had to cut large swaths of workers to stay afloat, it claimed. The two main unions, the International Brotherhood of Teamsters and the aforementioned BCTWGMU, began negotiations, with the Teamsters eventually coming to an agreement.
"We're pragmatic when it comes to this situation," Ken Hall, the Teamsters' secretary-treasurer, explained. "We know that it's a tough situation. We knew that because of mismanagement, the company was in a real hole."
The "mismanagement" has largely been blamed on Brian Driscoll, the former CEO, who resigned in March of this year. The gargantuan task of restructuring the company largely fell to Gregory F. Rayburn, who immediately cut four top executives salary to $1. He also worked out a deal with the Teamsters, giving them a 25 percent share of company stock, two seats on the board, and a $100 million bankruptcy claim.
That deal didn't matter, however, because the BCTWGMU- about 30 percent of Hostess' workers- felt the plan wouldn't work.
"Our consultant said the debt load on the company was too heavy, and that we would be back in bankruptcy and facing liquidation in 12 to 16 months from now, even if we took more concessions," David B. Durkee, the union's secretary-treasurer, told The Times.
The stalwart stance resulted in a stalemate, and a strike of Hostess workers. Now, though, they have been granted a reprieve to figure out a deal on Tuesday.
"We didn't think we had a runway, but the judge just created a 24-hour runway," Rayburn told the Huffington Post, adding that there was a lot of pressure from investors to come to an agreement. Although the plants aren't currently running, the snack company generates $2.5 billion in sales annually, with $65 million from Twinkies alone.
