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Restructuring: Court Approves Bankrupt Hostess’ Auction Plans

The Twinkie maker’s first auction is for its Wonder bread and other primary bread assets, scheduled for Feb. 28

Now that a New York bankruptcy judge approved bankrupt Hostess Brands Inc.’s bidding procedures, the Twinkie-maker is headed to auctions on Feb. 28, March 13 and March 15.

Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York approved the company’s bidding procedures to sell its Hostess and Dolly Madison brand assets on Feb. 11.

Private equity firms Apollo Global Management LLC and C. Metropoulos & Co. are in place as the stalking-horse bidders, or lead bidders, for the Hostess and Dolly Madison assets, which include Twinkies, Mini Muffins, Cup Cakes, Ho Hos, Zinger and Suzy Qs. The pair, bidding as HB Holdings LLC and New HB Acquisition LLC, would also acquire five bakeries through the $410 million deal. If Apollo and C. Metropoulos don’t win at an auction, they will get a $12.3 million breakup fee.

An auction for the Hostess and Dolly Madison brand assets is scheduled for March 13. Bids would need to increase by $1 million increments after an initial overbid is made. Hostess has yet to determine the amount of the initial overbid needed, according to court documents.

Mountain States Bakers LLC $28.85 million bid for the secondary bread assets, including the Sweetheart, Standish Farms and Eddy’s brands, was also approved on Feb. 11, as was McKee Food Corp.’s $27.5 million bid for Drakes. The Drakes assets include Coffee Cakes, Devil Dogs, Funny Bones, Ring Dings, Sunny Doodles, Yankee Doodles and Yodels. If other bids are received an auction will be held on March 15.

Drain approved Hostess’ bidding procedures for its primary bread business, including Wonder bread, with Flowers Foods Inc. in place as the stalking horse bidder, with two bids worth $390 million, on Jan. 28. Bids at an auction would need to increase in $1 million increments. If Hostess receives other bids for the assets an auction will be held Feb. 28.

Hostess decided to wind down operations after it failed to resolve issues with striking bakers’ union. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCT) and other unions started striking on Nov. 9, which caused the company to lose between $7.5 million and $9.5 million in a matter of weeks, according to court documents. The strike came after troubled negotiations regarding collective bargaining agreements (CBAs).

The baker filed for bankruptcy protection on Jan. 11, 2012. When the company sought bankruptcy protection, it operated 36 bakeries, 565 distribution centers, 5,500 delivery routes and 570 bakery outlet stores in the U.S.

Hostess, founded in 1930, was one of the largest wholesale bakers and bread distributors in the U.S.

Jones Day is debtor counsel. Kramer Levin Naftalis & Frankel LLP is counsel to the committee of unsecured creditors. Hostess has retained Hilco Trading LLC to sell real estate, machinery and equipment.

Partners Robert Robison, James Garrity Jr., Stanley Lechner, Ron Dreben, Judith Walkoff, Gary Rothstein and Harry Robins of Morgan Lewis and Bockius served as Apollo’s legal counsel for the deal.

 

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