Hostess Brands Inc agreed in court on Monday to enter private mediation with its lenders and leaders of a striking union to try to avert the liquidation of the maker of Twinkies snack cakes and Wonder Bread.
Hostess, its lenders and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) agreed to mediation at the urging of Bankruptcy Judge Robert Drain of the Southern District of New York, who advised against a more expensive, public hearing regarding the company's liquidation. My desire to do this is prompted primarily by the potential loss of over 18,000 jobs as well as my belief that there is a possibility to resolve this matter, Drain said.
The 82-year-old Hostess was seeking permission to liquidate its business, claiming that its operations have been crippled by a bakers strike and that winding down is the best way to preserve its dwindling cash. Hostess suspended operations at all of its 33 plants across the United States last week as it moved to start selling assets.
Heather Lennox, a lawyer for Hostess, said it would be hard for Hostess to recover from the damage it sustained due to the strike even if an agreement was forthcoming. Yet following the hearing, Hostess Chief Executive Officer Gregory Rayburn told reporters that there was always a chance Hostess could be saved.
I think we have to see what unfolds, Rayburn said. My impression is that the judge wants to understand the parties' positions and some of their logic, but it doesn't change our financial position.
I'm happy to have the help, he added, referring to Drain's mediation following a breakdown of communication between Hostess and the union. Maybe the judge will help. But can I handicap how it's going to go? No way.
A lawyer for Hostess' creditors' committee declined to comment. The court-sanctioned mediation could make both sides more willing to give, said Nick Kalm, a communications consultant specializing in labor relations.
It makes it much more likely that the company will put forward something that is less draconian... and the union will take it. The union realizes they are out of options, said Kalm.
BEHIND CLOSED DOORS
The BCTGM called the strike on Nov. 9 after Hostess sought and won court approval to impose wage and benefit cuts.
Unlike other unions representing workers at Hostess, the BCTGM did not contest Hostess's action -- which allowed it to reject a collective