Hostess Brands seeks 90-day extension of exclusive period to file plan

By Jim Witters

Wilmington, Del., April 4 - Hostess Brands, Inc. is seeking a 90-day extension of its exclusive periods for filing a Chapter 11 plan and soliciting plan acceptances while it tries to renegotiate its collective bargaining agreements with union workers, formulate a backup marketing plan and identify potential plan sponsors, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

If granted, the request would extend the period during which the debtors have the exclusive right to file a Chapter 11 plan through Aug. 8 and extend the period during which the debtors have the exclusive right to solicit plan acceptances through Oct. 7.

Currently, the exclusive filing period expires on May 10 and the exclusive solicitation period expires on July 9.

A hearing on the request is scheduled for 10 a.m. ET on April 17.

Union contracts

To implement a turnaround plan, the debtors must achieve certain modifications to the collective bargaining agreements with its unionized work force, court documents state.

"Prior to the petition date, the debtors employed approximately 19,000 hourly and salaried employees of which 83% are members of 12 different unions, subject to 372 collective bargaining agreements," the company's motion states.

Nearly 92% of the unionized workers belong to either the International Brotherhood of Teamsters or the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, according to court documents.

The company has been negotiating for several months with the unions and has filed a motion with the court to reject the collective bargaining agreements and modify retiree benefits.

"The debtors continue to bargain in good faith with the IBT and BCT and are hopeful that a consensual resolution can be reached," according to court documents.

If no agreement emerges, a trial on the motions to reject the contracts and modify benefits will be scheduled for April 17.

Court documents say that it is unlikely that a ruling on those issues will be entered before the end of the current exclusive filing period, May 10.

Additionally, the debtors are currently negotiating with their other 10 unions to obtain relief similar to that which is sought in the pending IBT and BCT motions.

"Resolution of all of these matters is necessary before the debtors can formulate a Chapter 11 plan," the documents state.

Financing the plan

The debtors have begun searching for investors interested in providing necessary financing for the debtors' Chapter 11 plan process, according to court documents.

The company contacted 41 potential investors, 14 of whom executed confidentiality agreements and began due diligence.

The debtors received the first round of proposals on Feb. 27. The second round of proposals is expected during the week of May 7.

"The debtors require additional time to complete this process before a plan of reorganization can be formulated," court documents state.

Asset sale plan

"Finally, the debtors have begun a parallel process to pursue a sale of their assets as a failsafe in the event that the modifications to their CBAs cannot be achieved. In accordance with the debtors' postpetition financing documents, which contemplate this contingency, the debtors have prepared various sale materials," court documents state.

The company argued that preparation of those documents has consumed time that otherwise could have been used to prepare a Chapter 11 plan.

Hostess Brands, an Irving, Texas-based operator of regional bakeries, filed for bankruptcy on Jan. 11. Its Chapter 11 case number is 12-22052.

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