When Hostess Brands, maker of Wonder Bread, Twinkies, and Ding Dongs, declared bankruptcy on January 12, it said it can’t make interest payments on its $860 million of outstanding debt and make payments into its unions’ pension plans as well. So it stopped making the pension plan contributions.
Ripplewood Holdings, the private equity firm that holds controlling interest in Hostess, said it won’t invest any more money into the company unless the unions renegotiate the pension plan obligations. Hostess’ president, Gregory Rayburn, said that the company “is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules,” and so he’s demanding that the unions reduce the company’s obligations, currently at more than $100 million a year, to just $25 million. The unions aren’t budging, and the case is going to court on Tuesday, April 17, where the matter will be settled. There is a possibility for a settlement, but if the court supports the company, the unions have promised to go on strike. That, according to Rayburn, will force Hostess to liquidate and go out of business.
That will also end the unions’ claims and leave the members out of work.
The last time Hostess declared bankruptcy in 2004, it took nearly five years to settle, and the union finally acquiesced, taking some equity in the company in exchange for pension liabilities. This time the unions appear to be ready to accept the worst. One Hostess worker said,