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Hostess Asset Sales Could Happen by Mid-March

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Hostess Brands could close sales of some assets by mid-March, according to testimony in bankruptcy court in Lower Manhattan Friday. A representative from Hostess's financial advisor, Perella Weinberg said that a number of bidders threw their hats in the ring on December 10.

The firm has winnowed down those bids to a few "stalking-horse" bidders. Stalking-horse bids would set a floor for auctions that could occur in February. (Read More: The Fight to Buy Hostess: Main Street vs. Wall Street)

A stalking-horse bid refers to an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid.

Perella Weinberg expects to be able to file some of these bids in time for two bankruptcy hearings on January 25 and February 11, 2013. Once the bids are discussed in court, the brands can be put up for a general auction, which could take another 4 weeks. Any sales that come out of those auctions would take another two weeks or so to close.

"We will have stalking horse bids for substantially all of the brands by January," a representative of Perella Weinberg told the court.

Hostess Stores Cease Operating
Hostess Stores Cease Operating

There is "vibrant" interest in Hostess's cake and bread brands, according to Perella Weinberg. Among the cake brands, it's likely that the Hostess and Dolly Madison brands will be sold together, while Drake's is sold separately.

The bread brands, which include Wonder Bread, will likely be sold in three or four packaged bids. There are a number of bidders who would be interested in participating in a brand auction, but do not want to act as stalking horses, the investment bank's representative said in court today.

Good news for workers, about 30 of Hostess's facilities could be sold with the cake and bread brands, likely preserving those jobs. Another 6 plants would have to be liquidated in addition to "numerous depots and outlet stores as well as a fleet of delivery trucks," Perella Weinberg testified. (Read More: How Hostess Failed: Hedge Funds vs. Unions)

Hostess has entered into an agreement with Hilco, a liquidation agent to sell these additional assets. The agreement comes with a $30 million loan to help keep the company liquid. Hostess has $28.5 million of debt coming due in January, which the Hilco loan would effectively replace.

Hostess's wind down is "substantially complete," according to the company's bankruptcy counsel. "The plants have hosted multiple visits from potential buyers," the attorney said in court. About 87 percent of Hostess' plants have completed their wind downs. In addition, all the stores have ceased operation, and 92 percent of owned and leased stores have reported finishing their wind down process, Hostess's attorney said. As of December 17, Hostess had 1,100 employees, versus 3,000 when the bankruptcy process began. (Read More: Say It Ain't So! Twinkies Maker to Liquidate, Lay Off 18,500)

GE Capital is one creditor that raised objections to the way Hostess is unwinding. GECC's attorney was objecting to how Hostess proposes to use the proceeds from Hilco's loan. Hostess owes GECC $25 million. GECC has been pushing to have its loan paid back by Hilco's loan rather than waiting for Perella Weinberg and Hilco to sell properties.

Hostess believes it needs the loan for liquidity purposes. Judge Drain, presiding over Friday's hearing, ruled in favor of Hostess on this matter and approved the retention of Hilco.

—By CNBC's Margaret Popper; Follow her on Twitter: @popperm

Disclosure: General Electric is the minority owner of NBC Universal, the parent of CNBC and CNBC.com.