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View Diary: BREAKING: Hostess Brands to close as revenge for the striking workers standing up for their rights (351 comments)

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  •  Background on Twinkie's troubles (9+ / 0-)
    On one side are the Teamsters, and on the other are the two hedge funds, Silver Point and Monarch. Ripplewood is pretty much out of the picture by now, except to the extent it can eventually persuade the bankruptcy judge to toss it a bone. While Ripplewood retains some debt, its equity is so far under water that it might as well be gone. It doesn't attend negotiating sessions with the Teamsters -- such is the view from the bottom of the sea. Hostess is at the table but has resigned itself to being a mediator of sorts, with its interests subordinated to the hedge funds, which hold the senior secured debt.

    What the hedge funds want is some degree of capitulation from a union whose members will otherwise lose thousands of jobs in liquidation. If the hedge funds don't get it, they've concluded, the company isn't worth saving.

    Without the hedge funds' blessing, no Hostess turnaround is possible. Right now, according to sources with knowledge of Hostess's debt structure, Silver Point and Monarch each hold Hostess obligations with a market value of between $50 million and $100 million. Those sources also say each hedge fund probably paid somewhere between $125 million and $175 million for that debt. So even with losses to date, both hedge funds have ample skin in the game -- skin they'd like to get out of the game sooner rather than later. Of course, if the hedge funds again forgive sizable debt, they'll probably want sizable equity in return this time.

    Finally, there are the woebegone Teamsters. They have plenty of skin as well -- and feel as if they've been fleeced out of almost $100 million from Hostess after the company "temporarily" ceased making union pension contributions last August. That move by Hostess was a breach of its collective-bargaining agreement with the unions.[...]

    Hostess has proposed having workers themselves contribute to a single pension plan or, alternatively, switching to a pension arrangement in which Hostess would contribute to only a handful of MEPPs (MEPPs -- multi-employer pension plans -- which it is required to participate in under its labor agreements with the unions.) In the latter proposal, Hostess's annual contributions would go down from the required $100 million to $25 million or so. (If Hostess is allowed to pull out of the MEPPs, the plans would have claims against the company, but as unsecured creditors they would come away with little or nothing.)

    While the Teamsters have rejected that proposal, they've indicated a willingness to accept reduced contributions -- but only with the current MEPP structure in place. In April the Teamsters offered a pension holiday until next spring, and then a contribution level of 45% to 60% over the remaining three years of the collective-bargaining agreement. Hostess says that even that half a loaf is untenable. In May the bankruptcy judge appeared to share that view, ruling the current pension arrangement "creates too much uncertainty for any entity willing to commit substantial amounts of capital … to turn this company around."

    http://management.fortune.cnn.com/...

    The choice of our lifetime: Mitt Romney, It Takes A Pillage or President Barack Obama, Forward Together.

    by FiredUpInCA on Fri Nov 16, 2012 at 06:03:11 AM PST

    •  This seems very out of date (1+ / 0-)
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      CS in AZ

      The Teamsters accepted the concessions and the stance that Hostess had no choice but to liquidate if the Baker's Union didn't return to work. The Teamsters weren't the ones striking and were trying to get the Baker's union to hold a ballot to end the strike.

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