After more than 80 years of filling bellies with sugary snacks—including Twinkies, the cream-filled sponge cakes so impervious to the elements that they could supposely survive a nuclear armageddon—Irving, Texas–based Hostess Brands Inc. said Friday that it will wind down its operations and, with the U.S. Bankruptcy Court’s approval, liquidate all of its assets.
The announcement came as the bankrupt company—which is also known for such iconic products as Ho Hos and Wonder Bread, as well as the Dolly Madison and Drake’s brands—remained mired in a stand-off with its largest labor unions.
Hostess sought Chapter 11 protection in January with $1.4 billion in debt, three years after emerging from an earlier restructuring. (Skadden, Arps, Slate, Meagher & Flom corporate restructuring partner J. Eric Ivester advised Hostess—then known as Interstate Bakeries Corporation—in connection with that trip through bankruptcy, while Kasowitz, Benson, Torres & Friedman served as special litigation and conflicts counsel, according to our prior reporting.)
The company had hoped to restructure this time around by cutting labor costs, but workers represented by the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting a contract offer the union claims would significantly cut wages and benefits. Hostess closed a number of bakeries across the country earlier this week and threatened liquidation, and the company’s Thursday deadline for workers to return to their jobs passed with no resolution in sight.
Anyone visiting the Hostess website Friday found a barebones landing page topped by the headline “Hostess Brands Is Closed.” The company statement appearing beneath that banner referred to the stalled contract talks and said Hostess can not turn a profit under its existing cost structure, “much of which is determined by union wages and pension costs.”
Founded as Interstate Bakeries in 1930, Hostess has lost $250 million since emerging from its previous restructuring in 2009. The company has 33 bakeries and 565 distribution centers across the country, all of which will be closed in the proposed liquidation. While nearly all of the company’s 18,500 workers will be soon be out of work, Hostess has asked the court to allow it to retain some employees to help wind down the company’s operations.
A team from Jones Day filed Friday’s bankruptcy court request on behalf of Hostess. The firm’s team, led by bankruptcy partner Corinne Ball, had been advising the company on its restructuring efforts throughout the year. (The Am Law Daily reported in January on the firm’s representation of Hostess and the hourly billing rates for Jones Day partners, as well those for lawyers from several other firms working on the Chapter 11 case.)
Hostess has also been represented throughout the bankruptcy proceedings by Venable as special employee benefits counsel, and by Stinson Morrison Hecker as general corporate and conflicts counsel. Venable’s most recent monthly fee statement in connection with the Hostess bankruptcy listed time recorded by bankruptcy of counsel Frederick Carter at a rate of $520 per hour, while labor and employment partner Gregory Ossi is billing at $595 per hour.
The Hostess bankruptcy docket lists bankruptcy partner Paul Hoffman as the lead for Stinson’s team, at an hourly billing rate of $550. Hourly billing rates of other Stinson lawyers advising Hostess, based on a November 7 bankruptcy filing, include: capital markets partner James Allen ($510); bankruptcy partner Katherine Becker ($400); intellectual property partner Stephen Cosentino ($395); employee benefits partner Scott Hecht ($450); business litigation of counsel Christopher Leopold ($355); finance partner James Pfeffer ($425); corporate partner James Selle ($290); finance partner Kenneth Starkey ($420); bankruptcy partner Sharon Stolte ($400); and environmental partner David Tripp ($550).
(Former of counsel Kent Magill is also among the Stinson lawyers listed in the fees filing, at an hourly rate of $575. Magill is the former general counsel of Hostess who joined Stinson in March before turning around and heading back in-house in June, when he took a position as general counsel of Sara Lee’s North American retail and food service business.)
The committee of unsecured creditors in the Hostess bankruptcy has been advised throughout the proceedings by Kramer Levin Naftalis & Frankel. Kramer Levin’s team includes restructuring partners Joshua Brody, Paul B. O’Neill, and Thomas Moers Mayer. Curtis, Mallet-Prevost, Colt & Mosle is serving as conflicts counsel to the unsecured creditors, led by restructuring cochair Steven Reisman.
A recent bankruptcy court filing approving the payment of advisory fees shows that Jones Day had been authorized to receive a total of $14.3 million in fees and expenses for its representation of Hostess during the period that began with the company’s January 11 Chapter 11 filing and ended August 31. The court has also approved the payment of fees and expenses covering the same period to the following firms in the following amounts: Stinson ($506,164), Venable ($217,391), Kramer Levin ($2.1million), and Curtis Mallet-Prevost ($250,191).
Thompson & Knight restructuring partner Ira Herman, meanwhile, is leading a team from that firm representing The Bank of New York Mellon in its role as indenture trustee.
Hostess also says that a collection of private equity and hedge fund lenders lenders are allowing the company continued access to the $75 million debtor-in-possession financing it received at the start of its bankruptcy proceedings. As The Am Law Daily has previously reported, Paul, Weiss, Rifkind, Wharton & Garrison bankruptcy partner Alan Kornberg had been representing a finance unit of one of those lenders, Silver Point Capital.
Hostess is not the only confectioner to face fiscal issues in recent years. Philadelphia-based Tasty Baking Co. had to dig itself out of debt last year with its $34 million sale to bakery company Flowers Foods Inc. The nearly 100-year-old company, which makes Tastykakes brands such as Kandy Kakes and Krimpets, had seen its stock prices plummet nearly 75 percent over the course of a year, Reuters reported at the time.