Hostess Lays Off 15,000 After Judge Approves Liquidation
Hostess Brands CEO said 15,000 workers will be immediately laid off after a judge ruled Wednesday that the Twinkie maker will be allowed to liquidate.
CEO Greg Rayburn told CNBC's "Closing Bell" that the company's 18,500 workers would be cut down to 3,500 today, with another sharp round of layoff in two months.
Rayburn said there is a great deal of interest in the company's brands, which include such household names as Ho Hos and Wonder Bread, and that proceeds from the sale of such brands could reach $1 billion.
Previous efforts to raise interest in the sale of the company were foiled by "potential pension liabilities," he said.
Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York approved the 82-year-old company's plan to wind down over the next year, after Hostess failed to reach a deal Tuesday in mediation with the Bakery, Confectionery, Tobacco and Grain Millers Union.
Rayburn said that the union's strike had blown too large a financial hole in the company to be mended.
"Bankrupt companies don't have a lot of margin for error, and to take a shot like that is pretty hard to come back from."
With that damage done, there was no financing solution, Rayburn said. "And the judge understood that."
(Read More: Hoard Twinkies?! Hostess Threatens to Shut Down)
The ailing company went to bankruptcy court Monday to seek permission to liquidate its business. But Drain urged the sides into a private mediation, prompted by a desire to protect the jobs at stake.
Hostess runs 33 bakeries, 553 distribution centers, about 5,500 delivery routes and 527 bakery outlet stores throughout the United States. Rayburn came to Hostess last February to try to turn around the already bankrupt company.
Bakery operations ceased last week, though product deliveries to stores continued in order to sell already-made products. The company has blamed union wages and pension costs for contributing to its unprofitably.
Aside from its unionized workforce, analysts, bankers and restructuring experts have said that a fleet of inefficient and out-of-date factories has also eaten up costs.
They have said the brand names were likely to be more valuable once they were separated from the factories and sold to non-union competitors.
Bankers have said rivals including Tastykake maker Flowers Foods and Mexico's Grupo Bimbo were very likely to be interested in some, but not all, of the brands. Neither company could be reached for comment. Private equity firms are also interested.
Sun Capital Partners is interested in bidding for all of Hostess, according to a source familiar with Sun's plans, and Metropolous & Co. is also interested, according to Daren Metropolous, a principal at the firm. Officials at Sun did not respond to requests for comment.
Reuters contributed to this report.
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