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WHITE PLAIN, N.Y. -- Hostess Brands Inc. won approval in U.S. Bankruptcy Court for the Southern District of New York to begin closing down it operations after talks between the company and the Bakery, Confectionary, Tobacco and Grain Millers Union broke down.
On Monday afternoon, the Irving, Texas-based company and its striking union had been ordered to enter mediation by Judge Robert Drain. Those efforts failed, however, and during a hearing Wednesday afternoon, Drain gave the go-ahead for Hostess to move forward with its liquidation plans.
"It appears clear to me that the debtors have taken the right course in seeking to implement the wind-down plan as promptly as possible," Drain said near the end of a four-hour hearing, according to Reuters.
More than 18,000 employees will face unemployment: 15,000 workers will lose their jobs immediately and most of the remaining 3,200 will no longer be employed after about four months. The entire wind-down process is expected to take about a year, the company said.
"This is a tragedy, and we're well aware of it," Heather Lennox, a lawyer for Hostess, told the judge. "We are trying to be as sensitive as we can possibly be under the circumstances to the human cost."
The court order allows Hostess Brands to return excess ingredients and packaging; provides liquidity through an amended debtor-in-possession financing agreement and consensual use of cash collateral; and authorizes the company to implement a non-executive employee retention plan to ensure Hostess has the necessary personnel to implement the wind down, according to the company.
The company's woes came to a head on Friday, Nov. 16 when Hostess moved forward with bankruptcy plans. That move came a week after its bakers union went on strike Nov. 9. Hostess, which filed for bankruptcy in January, had asked employees to agree to an eight-percent pay cut, a 20-percent increase in healthcare costs, closure of 10 to 12 plants and changes to pension and workday provisions.
Hostess operates 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States. In addition to dozens of baking and distribution facilities around the country, Hostess will sell its popular brands, including Hostess, Drakes and Dolly Madison, which make iconic cake products such as Twinkies, CupCakes, Ding Dongs, Ho Ho's, Sno Balls and Donettes. Its bread brands to be sold include Wonder, Nature's Pride, Merita, Home Pride, Butternut and Beefsteak.
Since Hostess filed plans to liquidate has been plenty of talk of about possible buyers. The names thrown into the mix include Sun Capital Partners, Flower Foods and Mexico's Grupo Bimbo S.A.B. de C.V