By The Associated Press
Twinkies won't die that easily after all.
Hostess Brands Inc. and its
second largest union will go into mediation to try and resolve their
differences, meaning the company won't go out of business just yet. The
news came Monday after Hostess moved to liquidate and sell off its
assets in bankruptcy court citing a crippling strike last week.
The bankruptcy judge
hearing the case said Monday that the parties haven't gone through the
critical step of mediation and asked the lawyer for the Bakery,
Confectionery, Tobacco Workers and Grain Millers International Union,
which has been on strike on Nov. 9, to ask his client, who wasn't
present, if the union would agree to participate. The judge noted that
the bakery union went on strike after rejecting the company's latest
contract offer, even though it never filed an objection to it.
"Many people, myself
included, have serious questions as to the logic behind this strike,"
said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court
in the Southern District of New York in White Plains, N.Y. "Not to have
gone through that step leaves a huge question mark in this case."
Hostess and the union are expected to begin the mediation process on Tuesday.
Irving, Texas-based
Hostess, weighed down by debt, management turmoil, rising labor costs
and the changing tastes of America, decided on Friday that it no longer
could make it through a conventional Chapter 11 bankruptcy
restructuring. Instead, it's asked the court for permission to sell
assets and go out of business.
It's a far cry from when
the maker of Twinkies, Ding Dongs and Ho Ho's filed for bankruptcy in
January, its second Chapter 11 filing in less than a decade. The company
had hoped to emerge with stronger financials. It brought on CEO Gregory
Rayburn as a restructuring expert and was working to renegotiate its
contract with labor unions.
But Rayburn wasn't able to
reach a deal with the bakery union, which went on strike Nov. 9. Rayburn
said that Hostess was already operating on razor thin margins and that
the strike was the final blow.
The company's announcement
on Friday that it would move to liquidate prompted people across the
country to rush to stores and stock up on their favorite Hostess treats.
Many businesses reported selling out of Twinkies within hours and the
spongy yellow cakes turned up for sale online for hundreds of dollars.
Even if Hostess goes out of
business, its popular brands will likely find a second life after being
snapped up by buyers. The company says several potential buyers have
expressed interest in the brands. Although Hostess' sales have been
declining in recent years, the company still does about $2.5 billion in
business each year. Twinkies along brought in $68 million so far this
year.
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2012 The Associated Press. All rights reserved. This material may not
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