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The Day the Twinkie Died ~ 1500 strike . . . 18,500 get fired
- Thread starter melensdad
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When was this if you don't mind me asking?
I can say for a fact, by experience, that $16/hour gross is really hard to live on in the City of Chicago, the city where that wage was mentioned. There the Feds, State, city and County get first crack at your check. After you pay the employee insurance portion, you are lucky to see 1/2 of the money. Living expenses there are nuts. $1200 per month is a cheap apartment, in a marginal neighborhood. Minimum coverage car insurance with high deductable will easily set you back $150/month. I was paying over $400 per month for a parking spot for the car. When you get to work you have to pay parking, that ends up another $240 per month. Utilities are very high there, as is food and fuel. The property tax is high there if you can own a house. My property tax was $7200 plus for a plain ranch style home with a 2 car garage, admittedly, it was in a fairly safe suburb.
All this to say, $16.00/hour in Chicago is like making $7.00/hour in central Indiana. That wage is not what brought Hostess brands to it's knees.
We are being manipulated. With fat cat executives being able to pull off mutli million compensation packages above the table and who knows how much more under the table, why wouldn't they work hard on shifting the blame away from themselves?
All this to say, $16.00/hour in Chicago is like making $7.00/hour in central Indiana. That wage is not what brought Hostess brands to it's knees.
We are being manipulated. With fat cat executives being able to pull off mutli million compensation packages above the table and who knows how much more under the table, why wouldn't they work hard on shifting the blame away from themselves?
Pabst Owner Metropoulos Considers Bid for Hostess Brands - Bloomberg
C. Dean Metropoulos & Co., the private equity firm that owns Pabst Brewing Co., is considering an offer to buy Hostess Brands Inc.
“We have analyzed this opportunity very carefully for a few years now,” Metropoulos said in an e-mail. “Shedding the complications of the unions and old plants makes it even more attractive.We are actively pursuing this deal as no doubt strategics will also.”
A deal is probably already done and the only people getting screwed are taxpayers who will be forced to fund the pensions through the Federal Pension Benefit Guaranty corp.
1930 - Interstate Bakery Corp starts in Kansas City as a bread wholesaler.
1937 - Merges with Schulze Baking of Chicago
1943 - Buys Supreme Baking Company in Los Angeles
1950 - Buys O'Rourke Baking Co of Buffalo NY
From 1951 to 1968 they buy up the following brands:
Ambrosia Cake Company, the Remar Baking Company, the Butter Cream Baking Company, Campbell-Sell Baking Company, the Kingston Cake Bakery, Cobb's Sunlit Bakery, Schall Tasty Baking Company, Sweetheart Bread Company, Hart's Bakeries, Millbrook Bread, Baker Canning Company, Shawano Farms, Inc. and the Shawano Canning Company.
1969 - The company changed its name to Interstate Brands. Its signature brands were Butternut and Blue Seal breads, and Dolly Madison cakes. Butternut Breads was a manufacturer of bread products that had been in business since 1902.
1975 - Interstate was acquired by Data Processing Financial and General Corporation, known as DPF, a computer leasing company that had run into difficulties during the IBM antitrust battles, which changed pricing for IBM hardware. This is where the REAL problems start.
1981 - DPF completed the sale of its remaining computer systems and changed the company name back to its original Interstate Bakeries. Interstates headquarters moved back to Kansas City.
1986 - the company acquired Purity Baking Company and Stewart Sandwiches, followed in 1987 by Landshire Food Products.
1987 - Management takes the company private, changing the name to IBC Holdings. IBC bought the Merita/Cotton's Bakeries division of the American Bakeries Company.
1991 - The private company changed back to publicly traded company, changing its name back to Interstate Bakeries.
1995 - Interstate acquired Continental Baking Company, from Ralston Purina, for US$330 million and 16.9 million shares of Interstate stock. Continental had acquired Taggart Bakeries, of Indianapolis, Indiana, in 1925, and brought Taggart's original creations Wonder Bread and Hostess brands – amongst others – to Interstate.
2004 - Interstate Bakeries filed for Chapter 11 bankruptcy. The company also named a new chief executive, Tony Alvarez. Interstate Bakery's stock, which had been at one time $34/share, fell to $2.05/share as they declared bankruptcy. At the time it was the longest bankruptcy in U.S. history. During bankruptcy, Interstate fought a 2007 bid from Mexican baked goods giant Grupo Bimbo and Ron Burkle of the Yucaipa Companies.
With the leadership of Craig Jung, the company emerged from bankruptcy as a private company on February 3, 2009. The plan included a 50 percent equity stake by Ripplewood Holdings and lines/loans by General Electric Capital and GE Capital Markets, Silver Point Finance and Monarch Master Funding. Interstate's union workers made contract concessions in exchange for equity.
During the 2004–2009 bankruptcy period, Interstate closed nine of its 54 bakeries and more than 300 outlet stores. Interstate's work force declined from 32,000 to 22,000 employees. Effective November 2, 2009, the company was renamed Hostess Brands, Inc. after the cake division that featured Twinkies and cupcakes.
In March 2012, Brian Driscoll resigned from his position as CEO. Gregory Rayburn, who had been hired and named Chief Restructuring Officer only nine days earlier, assumed the leadership position. Fortune reported that unions within the organization had been unhappy with Driscoll's proposed compensation package of $1.5 million, plus cash incentives and a $1.95 million "long term compensation" package. Additionally, the court had discovered that Hostess executives had received raises of up to 80% the year prior. In an effort to restore relations, Rayburn cut the salaries of the four top Hostess executives to $1, to be restored on January 1 the following year.
In November 2012, Hostess employees nationwide went on strike. The Bakery, Confectionery, Tobacco Workers and Grain Millers' International Union, which represents 6,600 Hostess employees, took the strike action after the latest contract proposal from Hostess Brands was rejected by 92 percent of its members.
In response, Hostess Brands issued the following statement: "A widespread strike will cause Hostess brands to liquidate if we are unable to produce or deliver products. If that's the case, the company will move selling its assets to the highest bidders. We urge our employees to remain on the job to rebuild the company.
However, in order to actually liquidate, it needs the permission of U.S. Bankruptcy Court Judge Robert Drain
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Yep... Mine is only @ 1.3% and damm glad to pay it..
BehindBlueI's
Grandmaster
- Oct 3, 2012
- 25,903
- 113
How Hostess Failed: Hedge Funds vs. Unions - US Business News - CNBC
When Hostess Brands announced that it would close up its operations, the forces most responsible for that decision were two hedge funds that control hundreds of millions of Hostess debt and which have finally decided they won't squeeze any more filling into the Twinkie.
The funds, Silver Point and Monarch, are what are known as distressed debt investors. They buy the debt of troubled companies—usually at steep discounts. Some consider them white knights who are willing to take make risky investments in companies on the verge of failure. Others say they are “vulture funds.”
Only Silver Point and Monarch could have kept Hostess out of liquidation and kept the Twinkie bakery ovens firing. But they were, ultimately, unable to reach a deal with the unions that represents the workers who make and deliver products like Twinkies, Wonderbread and Ding Dongs. Without large union concessions—what some would say, total union capitulation—the hedge funds decided Hostess would have to die.
This is not the first time Hostess Brands has entered bankruptcy. Weighed down by an balance sheet heavy with debt and pension obligations, costly labor rules, and declining sales, the company sought bankruptcy protection under Chapter 11 in 2004.
After nearly five years in bankruptcy, Hostess emerged in 2009 under the control of a private equity firm called Ripplewood Holdings, which invested $130 million of new capital in the company. The keys to coming out of the bankruptcy the first time around were concessions by the two groups most responsible for Hostess falling back into bankruptcy just 3 years late: the unions and lenders that owned secured company debt nominally worth around $450 million.
In the deal that allowed Hostess to come out of bankruptcy, the unions agreed to concessions that would save the company around $110 million a year in labor costs. The lenders, led by the hedge funds Silver Point and Monarch, agreed to provide a new secured loan of $360 million, forgive half the existing debt, and exchange the rest of that debt for a payment-in-kind loan.
(Read More:NOOOOOOOO! Say It Ain't So! Twinkies Maker to Liquidate, Lay Off 18,500)
It’s worth mentioning that we don’t know how much of a loss—if anything—Silver Point and Monarch took on the loans by agreeing to reduce the amount outstanding. As David Kaplan pointed out in his extensively detailed article in the August 13th issue of Fortune, the amounts the hedge funds paid for the debt are not in the public record. Distressed debt funds—critics call them vulture funds—typically pay far less than face value when buying the debt of troubled companies.
RELATED LINKS
Outrageously Expensive Fast Foods
Hostess CEO 'Hopeful We Can Sell the Brands'
10 Holiday Cocktail Recipes from Top Mixologists
This wasn’t enough to save the company.
The company’s sales declined and attempts to roll-out new products more in line with changing consumer tastes flopped. Ripplewood put tens of millions more into the company in the form of new equity and subordinated debt. Silver Point and Monarch put in another $30 million and then, after the company filed for Chapter 11 again in January of this year, another $75 million.
What happened next was just a mess. The CEO quit. The unions described the pay of the new CEO as “looting.” Acrimonious would be a very mild term to describe relations between management and the unionized workers. One person familiar with the matter described it as “all-out war.” The place to turn for the details of this is, again, David Kaplan’s Fortune article.
Ripplewood basically fell out of the picture during this period. Its equity investment was worthless, and it’s subordinated debt was deeply underwater. It just stopped showing up at negotiations with the unions, according to Kaplan.
The folks left at the negotiating table with the unions were Silver Point and Monarch.
Here’s how Kaplan put the situation as of last summer:
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. The Teamsters' leadership has fulminated to its membership about the hedge funds in particular. "The financial folks make a living of feeding off distressed companies," Hall says. "They lose sight of the fact that there are real families with livelihoods at stake." At local unions across the country, the hedgies have become the devil incarnate.
Now we know how this story ends. The Teamsters agreed in September to a deal with reduced pay and benefits. But the Bakery Workers union rejected the deal and went on strike. Hostess warned that if the strike continued it would not be able to stay in business. But the strike went on. And now Hostess is out of business.
The hedge funds concluded that Hostess isn’t worth saving. The unions either bet the hedge funds would blink before putting the company into liquidation or decided that it was better to sacrifice the jobs of Hostess workers than give in to demands for further pension concessions.
(Read More: Not So Yummy: 15 Major Fast Food Failures)
Although it now appears that Hostess is done, this is not the end of the story. The brands Hostess owns retain value. Someone will likely produce Twinkies again. The plants and workers are also valuable and will likely find bidders. Silver Point and Monarch—as well as the other secured creditors—will realize some value for their investment in the company, although certainly far less than they had hoped. (But, since we don’t know how much they spent on the debt, we may never know whether they gained or lost on the deal.)
And, of course, we’ll be in for a long bout of recriminations as everyone involved points fingers at everyone else. The truth of the matter may just be that Hostess was a failed enterprise that just could not be saved.
When Hostess Brands announced that it would close up its operations, the forces most responsible for that decision were two hedge funds that control hundreds of millions of Hostess debt and which have finally decided they won't squeeze any more filling into the Twinkie.
The funds, Silver Point and Monarch, are what are known as distressed debt investors. They buy the debt of troubled companies—usually at steep discounts. Some consider them white knights who are willing to take make risky investments in companies on the verge of failure. Others say they are “vulture funds.”
Only Silver Point and Monarch could have kept Hostess out of liquidation and kept the Twinkie bakery ovens firing. But they were, ultimately, unable to reach a deal with the unions that represents the workers who make and deliver products like Twinkies, Wonderbread and Ding Dongs. Without large union concessions—what some would say, total union capitulation—the hedge funds decided Hostess would have to die.
This is not the first time Hostess Brands has entered bankruptcy. Weighed down by an balance sheet heavy with debt and pension obligations, costly labor rules, and declining sales, the company sought bankruptcy protection under Chapter 11 in 2004.
After nearly five years in bankruptcy, Hostess emerged in 2009 under the control of a private equity firm called Ripplewood Holdings, which invested $130 million of new capital in the company. The keys to coming out of the bankruptcy the first time around were concessions by the two groups most responsible for Hostess falling back into bankruptcy just 3 years late: the unions and lenders that owned secured company debt nominally worth around $450 million.
In the deal that allowed Hostess to come out of bankruptcy, the unions agreed to concessions that would save the company around $110 million a year in labor costs. The lenders, led by the hedge funds Silver Point and Monarch, agreed to provide a new secured loan of $360 million, forgive half the existing debt, and exchange the rest of that debt for a payment-in-kind loan.
(Read More:NOOOOOOOO! Say It Ain't So! Twinkies Maker to Liquidate, Lay Off 18,500)
It’s worth mentioning that we don’t know how much of a loss—if anything—Silver Point and Monarch took on the loans by agreeing to reduce the amount outstanding. As David Kaplan pointed out in his extensively detailed article in the August 13th issue of Fortune, the amounts the hedge funds paid for the debt are not in the public record. Distressed debt funds—critics call them vulture funds—typically pay far less than face value when buying the debt of troubled companies.
RELATED LINKS
Outrageously Expensive Fast Foods
Hostess CEO 'Hopeful We Can Sell the Brands'
10 Holiday Cocktail Recipes from Top Mixologists
This wasn’t enough to save the company.
The company’s sales declined and attempts to roll-out new products more in line with changing consumer tastes flopped. Ripplewood put tens of millions more into the company in the form of new equity and subordinated debt. Silver Point and Monarch put in another $30 million and then, after the company filed for Chapter 11 again in January of this year, another $75 million.
What happened next was just a mess. The CEO quit. The unions described the pay of the new CEO as “looting.” Acrimonious would be a very mild term to describe relations between management and the unionized workers. One person familiar with the matter described it as “all-out war.” The place to turn for the details of this is, again, David Kaplan’s Fortune article.
Ripplewood basically fell out of the picture during this period. Its equity investment was worthless, and it’s subordinated debt was deeply underwater. It just stopped showing up at negotiations with the unions, according to Kaplan.
The folks left at the negotiating table with the unions were Silver Point and Monarch.
Here’s how Kaplan put the situation as of last summer:
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. The Teamsters' leadership has fulminated to its membership about the hedge funds in particular. "The financial folks make a living of feeding off distressed companies," Hall says. "They lose sight of the fact that there are real families with livelihoods at stake." At local unions across the country, the hedgies have become the devil incarnate.
Now we know how this story ends. The Teamsters agreed in September to a deal with reduced pay and benefits. But the Bakery Workers union rejected the deal and went on strike. Hostess warned that if the strike continued it would not be able to stay in business. But the strike went on. And now Hostess is out of business.
The hedge funds concluded that Hostess isn’t worth saving. The unions either bet the hedge funds would blink before putting the company into liquidation or decided that it was better to sacrifice the jobs of Hostess workers than give in to demands for further pension concessions.
(Read More: Not So Yummy: 15 Major Fast Food Failures)
Although it now appears that Hostess is done, this is not the end of the story. The brands Hostess owns retain value. Someone will likely produce Twinkies again. The plants and workers are also valuable and will likely find bidders. Silver Point and Monarch—as well as the other secured creditors—will realize some value for their investment in the company, although certainly far less than they had hoped. (But, since we don’t know how much they spent on the debt, we may never know whether they gained or lost on the deal.)
And, of course, we’ll be in for a long bout of recriminations as everyone involved points fingers at everyone else. The truth of the matter may just be that Hostess was a failed enterprise that just could not be saved.
...soo why did you emphasize that the company went private, when it went back to being publicly traded 4 years later? And the not emphasize that they went back to being public in 2004? I don't understand the emphasis.
I missed it. It's fixed now...the point I was trying to make is WHEN did Hostess Brands go back to being a privately held company? Part of the contract offered the Baker's Union (which reps 6600 of the 18,300 employees) was the 12 unions that Hostess Brands contacts with, would get a 25% ownership in the company, a seat on the BOD, and debt concessions...and an 8% pay cut. In 2009 the unions had already gotten an ownership stake in the company as well.
So why did the 1500 Baker Union members go on strike? A 25% stake in the company is nothing to sneeze at, although it is far from controlling interest. The other 11 unions and the other 12,000 employees appeared to be OK with the new deal.
Executive compensation seems to be way out of line, especially with a company that has been on the verge of death for the last 8 years. They never really gained any traction after the 2004 bankruptcy.
It looks to me like the one stubborn union, and the corporate management team killed the Twinkie.
public servant
Grandmaster
You should ask Wal-Mart. They've been pretty successful at it.
Of course if you listen to some of the people around here, it's because Satan himself owns Wal-Mart.
I wonder if Twinkies made in Mexico will taste the same?
hoosierdoc
Freed prisoner
Meijer is strongly anti-union as well. We had training videos on resisting union reps and how to spot them. When we opened, their union thugs picked the entrances, would flip off employees, yell at us. They'd put a bunch of frozen meat and perishables like huge turkeys and hams and then hide the cart on the inside of a clothes rack if possible so it would spool. That was my first experience with a union and it was all I needed to know.
HeadlessRoland
Shooter
HeadlessRoland
Shooter
Glad to hear it. People often conflate labor unions with protecting the interest of the working man, without realizing that they are an imposition to - and a monopolization of - labor supply. Unions effectively serve to inflate labor costs and skew the labor pool. This isn't Upton Sinclair's 'The Jungle'. People aren't losing fingers in meat-processing factories routinely. Kids aren't having their heads crushed in industrial looms (in this country, at least - I cannot speak for American Samoa or Guam or Taiwan or Brazil). Most of the laws on the books now are useless or redundant for 'protecting' workers and are instead but a chain around employers' necks. It's time we put Government out of business and get it out of business. Free markets of willing labor and willing employers are the sole solution to unemployment and poor labor conditions. Why do some refuse to understand this?
"What we have here is failure to communicate. Some men you just can't reach."
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