Milling & Baking News - October 02, 2012 - 10

Business 

Unions split vote on Hostess offer; hearing now set for Oct. 3 to decide company’s fate
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the debtors’ proposal,” Hostess said. Hostess has maintained it does not have a prospective buyer interested in acquiring any of its bakeries as going concerns, and said in the Sept. 20 filing that implementation of the B.C.T.G.M. proposal — together with relief from its other unions — is its “only chance to survive.” Hostess on Jan. 25 filed its first motion to modify its collective bargaining agreements with its union. At that time, the company sought to modify compensation packages provided to its employees to levels on par with similarly-situated workers and to modify work rules that impeded the efficient operations of the company’s business. Hostess also sought to exit all but two of the multiemployer pension plans covering its Teamster-represented employees and all multiemployer pension plans covering its B.C.T.G.M.-represented employees. In subsequent months, Hostess revised its turnaround plan to account for its deteriorated financial condition, specifically noting that prices of commodities the company uses had spiked. In addition, Hostess said its longer-than-expected stay in bankruptcy had adversely affected its ability to implement several of its turnaround plan initiatives, and a significant portion of the company’s private label customers failed to renew their contracts. As a result, Hostess on Aug. 29 made its last, best final offer to the B.C.T.G.M., including wage cuts of 8% in year one and a reduction in benefits. Hostess said it has proposed “nothing more than is necessary” to give it the “best (and only) chance to reorganize as a going concern.” “Without the relief sought here, the debtors will lose the support of their DIP lenders, prepetition lenders and the (Teamsters) and will be forced to liquidate,” Hostess said. “The B.C.T.G.M. has not proposed any alternative solution under which such a result could be avoided. Accordingly, the B.C.T.G.M. did not have a good cause to reject the B.C.T.G.M. (last, best final offer).” In the days prior to Hostess’ filing with the bankruptcy court emotions escalated to a point that after issuing its “no” vote on Sept. 14, Frank
10 / October 2, 2012 Milling & Baking News

Hurt, president of the B.C.T.G.M. International Union, lashed out at Gregory Rayburn, chief executive officer of Hostess. “Throughout this entire bankruptcy process, I have been crystal clear with Hostess management that our members will determine the outcome,” Mr. Hurt said. “On Aug. 14, the company presented to us their last, best, final and non-negotiable offer, which we sent to our local unions. The results speak for themselves.” Mr. Rayburn earlier said the B.C.T.G.M. International Union rejected the offer because it was “incorrectly informed” that “a white

members’ pension. They have seen the company fail to invest in product development and new plant and equipment as was promised when the company emerged from its previous bankruptcy and for which our members made significant concessions. “Our members have seen this company attempt to give millions of dollars in unseemly and unjustified bonuses to managers and supervisors in the midst of this bankruptcy. They have seen this company go through numerous c.e.o.s in the last seven years with not one of them having had any significant experience in the wholesale bread and cake baking business. “Our members reviewed the analysis of this company’s business

‘Without the relief sought here, the debtors will lose the support of their DIP lenders, prepetition lenders and the (Teamsters) and will be forced to liquidate. The B.C.T.G.M. has not proposed any alternative solution under which such a result could be avoided. Accordingly, the B.C.T.G.M. did not have a good cause to reject the B.C.T.G.M. (last, best ﬁnal offer).’
— Hostess Brands in a Sept. 20 ﬁling

knight would step in to buy the company and save their jobs, or that Hostess would return with a better offer.” But Mr. Hurt dismissed Mr. Rayburn’s comments, saying the union did not reject the proposal because of “bad information” but rather “because it was an outrageously unfair proposal from a company that has destroyed the trust of its workers through years of mismanagement, greed and unfulfilled promises.” “For Mr. Rayburn to state otherwise is an insult to our members’ intelligence and the integrity of the B.C.T.G.M. International Union,” Mr. Hurt said. “It is particularly offensive given that Mr. Rayburn (a ‘liquidation specialist’) has been with the company for less than a year while many, many of our members have given decades of dedicated service to Hostess Brands and its predecessor companies. “Our members have seen this company squander more than $50 million that it was contractually obligated to put toward our

plan provided by a highly-respected financial analyst retained by the company which showed that the plan has little or no chance of succeeding in saving the business but would provide the investors with a windfall. “Our members know that this is a company that is controlled by Wall Street private equity and hedge fund firms, whose sole objective is to maximize their own returns, not rebuild a company for the long haul.” The decision by the B.C.T.G.M. to reject Hostess’ offer came shortly after The Teamsters agreed to the terms, albeit reluctantly. “This was a difficult decision,” Ken Hall, general secretary-treasurer for the Teamsters, said on Sept. 14. “Our members are frustrated at being in the position to bail out the company again, but overall were willing to accept modifications with the hope that Hostess will recover and be in a better position in the years to come. At the end of the day, our members recognized that they can’t replace their pay and benefits in the non-union sector.” MBN
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Milling & Baking News - October 02, 2012

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