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Hostess, union agree to mediation at judge's urging

Monday, 19 Nov 2012 | 3:40 PM ET

WHITE PLAINS, New York (Reuters) - Hostess Brands Inc agreed in court on Monday to enter private mediation with its lenders and leaders of a striking union to try to avert the liquidation of the maker of Twinkies snack cakes and Wonder Bread.

Hostess, its lenders and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), agreed to go into mediation at the urging of Bankruptcy Judge Robert Drain of the Southern District of New York, who urged mediation rather than a more expensive, public hearing regarding the company's liquidation.

"My desire to do this is prompted primarily by the potential loss of over 18,000 jobs as well as my belief that there is a possibility to resolve this matter," Drain said.

The 82-year-old Hostess is seeking permission to liquidate its business, claiming that its operations had been crippled by a bakers strike and that winding down operations is the best way to preserve its dwindling cash.

Hostess suspended operations at all of its 33 plants across the United States last week as it moved to start selling assets.

Hostess faces several objections to its liquidation plan.

The U.S. Trustee, an agent of the U.S. Department of Justice who oversees bankruptcy cases, said in court documents it is opposed to the wind-down plan because Hostess plans improper bonuses to company insiders.

Several unions also objected to the company's plans, saying they made "a mockery" of laws protecting collective bargaining agreements in bankruptcy. The Teamsters, which represents 7,900 Hostess workers, said the company's plan would improperly cut the ability of remaining workers to use sick days and vacation.

(Writing by Martinne Geller and Brad Dorfman; Additional reporting by Tom Hals in Wilmington, Delaware; Editing by Leslie Gevirtz and Bob Burgdorfer)

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