Cases & Deals

Hostess Brands commences bankruptcy proceedings

Client(s) Hostess Brands Inc.

Jones Day represents client Hostess Brands, Inc. and its direct and indirect subsidiaries (collectively, "Hostess") as lead restructuring counsel, in Hostess' January 11, 2012 (the "Petition Date") filing under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") with more than $800 million in secured debt and a $75 million debtor-in-possession financing facility with Silver Point. Hostess' chapter 11 cases were commenced after union bargaining sessions and negotiations with multi-employer pension funds ("MEPPs") failed to produce a consensual resolution that would reduce the burdens of the company's union and legacy pension costs.

Accordingly, as required to meet certain "milestones" required by Hostess' $75 million debtor in possession financing, Hostess engaged in extensive litigation and negotiation with (a) the International Brotherhood of Teamsters (the "IBT"), (b) the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union (the "BCTGM"); and (c) Hostess' other unions, seeking to, among other things, eliminate the risks associated with Hostess' obligations to participate in the MEPPs, reduce the costs associated with non-pension benefits offered to union employees by standardizing the level of health and welfare benefits offered to union employees and eliminate work rules that create operational inefficiencies and prevent Hostess from entering new and potentially profitable markets. As a result, on September 14, 2012, Hostess' IBT-represented employees, as well as the majority of its other union employees thereafter, ratified Hostess' last best final offer; however, BCTGM employees covered by 112 of the 115 BCTGM collective bargaining agreements voted to reject. Accordingly, on October 4, 2012, the Bankruptcy Court entered an order granting Hostess to reject all of its collective bargaining agreements with the local affiliates of the BCTGM that voted against ratification. With labor concessions approved by the Bankruptcy Court, Hostess filed the Joint Plan of Reorganization of Debtors and Debtors in Possession (the "Plan") and Disclosure Statement with Respect to Joint Plan of Reorganization of Debtors and Debtors in Possession (the "Disclosure Statement") on October 10, 2012. The Plan contemplated Hostess' emergence from chapter 11 in January 2013 and represented a crucial step toward Hostess' emergence from reorganization proceedings. The Plan addressed billions of dollars of liabilities and required sacrifices at virtually all stakeholder levels.

In mid-November 2012, dissatisfied with contract negotiations, the BCTGM decided to strike. Hostess announced that it would liquidate the entire company if not enough striking employees returned to work. After a last ditch mediation effort between Hostess and its striking bakers' union failed in late November, the Bankruptcy Court authorized Hostess to begin liquidation proceedings.