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Hostess seeks to impose bankruptcy-exit deal in court after union rejects ‘outrageously unfair’ final offer

By Elaine WATSON , 19-Sep-2012
Last updated on 19-Sep-2012 at 16:50 GMT

Hostess Brands is seeking a legal means to force members of the union representing a big chunk of its staff to accept a deal they have rejected by an overwhelming majority, or says it will have no choice but to liquidate the company.

The Ding Dongs and Twinkies maker filed for bankruptcy protection in January, citing pension and medical benefit obligations, restrictive work rules and tough trading conditions, and has been pursuing new collective bargaining agreements with union employees ever since in a bid to emerge from Chapter 11.  

While the Teamsters union, which represents several thousand Hostess’ employees, has accepted the company’s latest offer, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) has rejected it by a 92% margin, dismissing it as “outrageously unfair”.

Hostess: If legal option fails, we will liquidate the company and sell its assets

But bosses at Hostess say they are not willing to put another offer on the table and have filed a motion under Section 1113 and 1114 of the US Bankruptcy Code with the bankruptcy court in White Plains, New York, to impose the same changes ratified by the Teamsters on employees represented by the BCTGM.

If granted, this would enable Hostess to “avoid liquidation and successfully emerge from Chapter 11”, a spokesman told FoodNavigator-USA.

“We have a hearing tentatively scheduled for October 3 where we will ask the judge for approval to impose the terms of the revised deal.”

If the judge did not approve the move, he added, “We will liquidate the company and sell its assets.”

BCTGM union: Members rejected offer because it was an outrageously unfair proposal

However, BCTGM International President Frank Hurt said in a statement that he expected the company to return to the negotiating table with “a fair and reasonable proposal for its workers and a legitimate business plan”.  

The union also seeks the restoration of $50m in pension contributions to members, he added: “Our members have seen this company squander more than $50m that it was contractually obligated to put towards our 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.”

He also rejected claims made by Hostess Brands boss Gregory Rayburn last week that BCTGM members had rejected the company’s proposal because they had been told that a ‘white knight’ might step in and buy the firm at the eleventh hour, or that Hostess would make a better offer.

"Contrary to CEO Rayburn's disingenuous and erroneous public comments, our members did not reject this proposal because of 'bad information' from the International Union.

 “They rejected it 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.”

"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."

Teamsters: Our members are frustrated at being in the position to bail out the company again

The Teamsters Union narrowly approved the contract modifications proposed by Hostess last week by 2,357 votes to 2,043.

General Secretary-Treasurer Ken Hall said: “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.”

In a press release issued last Friday Hostess boss Gregory Rayburn said rumors that a third party might swoop in and “invest in or purchase Hostess or a significant portion of its baking facilities if the Company's proposal was rejected” were false.

He added: “This is not true.  There is no white knight.  There is no better offer.  Our only option to save Hostess, preserve jobs and avoid liquidation is to amend our labor agreements." 

Texas-based Hostess Brands employs about 18,500 employees and operates 36 bakeries, 565 distribution centers and 570 bakery outlet stores in the US.

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