A federal bankruptcy judge has approved Hostess Brands’ plans to wind itself down, officially putting the Twinkies brand on the auction block.
In granting Hostess’ motion, Judge Robert D. Drain of the Southern District of New York cited the need for a quick and orderly shuttering of the company to avoid letting its assets molder. The alternative, a less-structured Chapter 7 liquidation, would be far worse.
“This estate will suffer substantial diminution if this wind-down plan is not quickly implemented,” he said. “It appears to me that the debtors have taken the right course.”
Drain’s motion spells the almost-certain end of Hostess, an 82-year-old company that survived the Great Depression, numerous wars and countless low-carb diets.
But the company, whose stable of sugary confections also include Ho Hos and Ding Dongs, struggled for more than a decade with the public’s increasing fondness for lower-calorie, less-processed snacks.
During a hearing that stretched for more than four hours, company executives and advisers espoused a simple message: Expedited sales of the failed baker’s brands will raise the maximum amount of money possible. And letting Hostess begin shutting its doors for good sooner would be kinder to employees.
Advisers sounded confident that the liquidation process, which is expected to take about a year, could yield big recoveries for creditors.
“Since we filed motion, we have received a flood of inquiries and think there can be a healthy competition,” Heather Lennox, a lawyer for the company, said at Wednesday’s hearing.
Hostess’ chief executive, Gregory Rayburn, testified in court Wednesday that he needed to lay off 15,000 of the company’s 18,500 employees that afternoon, so that they could begin applying for unemployment benefits.
“From this point forward, I need two things to happen,” he said. “I need to maximize the value of the estate, and I need to do the best thing for the employees.”
The hearing followed a last-minute mediation session between Hostess and its bakery employees union Tuesday. That gathering, convened at the behest of Drain, was meant to resolve a nearly two-week-old strike that company executive said fatally crippled its operations.
But after several hours of negotiations, the mediation talks collapsed.