Hostess can’t pay retiree benefits
Hostess
goals to bring down costs during the liquidation. The company says the incentive pay is needed to retain the 19 corporate officers and “highlevel managers” during the wind down process, which could take about a year.
Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation. The compensation would be on top of their regular pay.
The bonuses do not include pay for CEO Gregory Rayburn, who was brought on as a restructuring expert earlier this year. Rayburn is being paid $125,000 a month.
Hostess, based in the Dallas suburb of Irving, was given interim approval for its winddown last week, which gave the company the legal protection to immediately fire 15,000 union workers. The company said the terminations were necessary to free up workers to apply for unemployment benefits. About 3,200 employees are being retained to help in winding down operations, including 237 employees at the corporate level.
The bakers union, Hostess’ second-largest union, has asked the judge to appoint an independent trustee to oversee the liquidation, saying that the current management “has been woefully unsuccessful in its reorganization attempts.”
Hostess had already said last week that it was getting a flood of interest from potential buyers for its brands, which also include Devil Dogs and Wonder bread. The company has stressed it needs to move quickly to capitalize on the outpouring of nostalgia sparked by its liquidation.
“The longer these brands are off the shelves, the less they’re going to be valued,” Scherer said Thursday in U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y.
Last week, Scherer noted it was a “once-in-alifetime opportunity” for buyers to snap up wellknown products without the debt and labor contracts that would come with the purchasing the entire company. Although Hostess sales have been declining over the years, they’re still $2.3 billion to $2.4 billion a year.
Scherer also said a surprising number of potential buyers expressed interest in most of its three dozen factories.
The company’s demise came after years of management turmoil and turnover, with workers saying the company failed to invest in updating its products. In January, Hostess filed for its second Chapter 11 bankruptcy in less than a decade, citing steep costs associated with its unionized workforce.
Although Hostess was able to reach a new contract agreement with its largest union, the Teamsters, the bakers union rejected the terms and went on strike Nov. 9. Hostess announced its plans to liquidate a week later. In court Thursday, an attorney for Hostess noted that the company is no longer able to pay retiree benefits, which come to about $1.1 million a month. Hostess stopped contributing to its union pension plans more than a year ago.