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Hostess May Avoid Bankruptcy

Posted by on Nov. 19, 2012 at 10:38 PM
  • 1 Replies

Hostess May Avoid Bankruptcy

CNBC and Reuters are reporting that Hostess and the bakers’ union have agreed to mediation, avoiding bankruptcy for the maker of Twinkies and Ho Hos. Bargaining will begin tomorrow, but if the talks don’t produce an agreement, liquidation will go forward on Wednesday.

Hostess announced last week that it will go out of business, arguing that disputes with striking union workers are forcing the company out of business. On Monday, at a hearing on Hostess’ request to begin shutting down, a bankruptcy judge “asked whether he should preside over mediation” between the two parties.

Hostess had planned to request that the judge approve a plan that would have allowed it to pay $1.75 million in bonuses to 19 of its executives, who had already received pay raises earlier this year. Bankruptcy could result in “the firing of thousands of employees” and would force the company “to shut down 36 bakeries, 242 depots, 216 retail stores, and 311 hybrid depot-store facilities.”

by on Nov. 19, 2012 at 10:38 PM
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_Kissy_
by on Nov. 19, 2012 at 10:40 PM

Hostess To Pay $1.75 Million In Executive Bonuses After Blaming Unions For Bankruptcy

Hostess Brands, the maker of sweet snacks like Twinkies that filed for Chapter 11 bankruptcy protection last week, will ask a bankruptcy judge today to approve a plan that will allow it to pay $1.75 million in bonuses to 19 of its executives. Hostess’ decision to file for bankruptcy came amid disputes with its union workers, who threatened a strike that Hostess said imperiled the company’s finances. The unions are now protesting Hostess’ request for the bonuses, though they are unlikely to prevail, CNN Money reports:

Hostess Brands will ask a bankruptcy judge on Monday for approval to shut down the company and pay $1.75 million in executive bonuses.

Unions representing workers at the maker of Twinkies, Wonder Bread and Drake’s snacks are arguing against the bonuses. [...]

Under the plan, bonuses ranging from $7,400 to $130,500 will be paid to 19 executives. The company argues the bonuses are below market rates for such payments.

Even as it blamed unions for the bankruptcy and the 18,500 job losses that will ensue, Hostess already gave its executives pay raises earlier this year. The salary of the company’s chief executive tripled from $750,000 to roughly $2.5 million, and at least nine other executivesreceived pay raises ranging from $90,000 to $400,000. Those raises came just months after Hostess originally filed for bankruptcy earlier this year.

Hostess is hardly the only company that has compensated its executives during bankruptcy or times of financial instability. Failed financial firm MF Global gave CEO Jon Corzine an $8 millionpay package after it filed for bankruptcy, and Citigroup CEO Vikram Pandit received a $6.7 million pay package when he resigned, despite Citi’s 88 percent profit loss during his final quarter. And Hostess isn’t alone in giving executives massive raises while asking for concessions from union workers either: construction giant Caterpillar rewarded its CEO with a 60 percent pay raise, paying him $17 million, even as it forced a pay and pension freeze on its union workforce.

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