Judge orders Hostess to mediate with union first

Hostess Files for Bankruptcy

By Chris Isidore and James O’Toole

WHITE PLAINS, N.y. (CNNMoney) — Hostess Brands and a key union agreed Monday to try to mediate their dispute in coming days — an unexpected development that could spare the company from permanently shutting down.

The Bakery Workers union, which represents 5,000 of the 18,500 employees at the maker of Twinkies and Wonder Bread, went on strike on Nov. 9. The company had imposed paycuts and other concessions on its membership.

On Friday, management announced a shutdown of Hostess and appeared before U.S. Bankruptcy Judge Robert Drain Monday afternoon seeking approval to liquidate the company.

But Drain said he wanted the parties to try one last time to reach agreement. Drain will serve as the mediator at a session scheduled for Tuesday afternoon. Only one day of talks is set for now.

CEO Greg Rayburn said the company needs a final decision on Tuesday.

Tom Becker, spokesman for Hostess, said operations at its plants and distribution centers nationwide remain shutdown. They were closed Friday morning when the company announced plans to liquidate.

A spokesman for the Baker Workers union could not be immediately reached for comment. A spokesman for the Teamsters union, which represents 6,700 workers at Hostess, said he could not comment on the mediation.

Hostess has announced its intention to sell its brands, recipes for various products and other assets as a way to generate cash for its creditors. Even if the products are purchased by other companies and once again sold to consumers, most potential buyers are unlikely to rehire Hostess employees to produce or deliver those products.

One hope for the unions and the employees was raised earlier in the day Monday when private equity firm Sun Capital Partners disclosed it wants to buy Hostess as a going concern, including reopening the shuttered factories and continuing union representation of Hostess workers.

Before Sun Capital’s interest was first reported by Fortune Monday, the unions’ statements and filings seemed resigned to the fact that Hostess will be closed down and the hourly workers will be out of work.

The Bakery Workers union issued a statement Saturday citing mismanagement over a number of years for the company’s troubles.

Related: Hostess jobs: ‘Great’ to ‘Not worth saving’

“Hostess failed because its six management teams over the last eight years were unable to make it a profitable, successful business enterprise,” said the union.

But it said its members understood when they went on strike that a shutdown of the company would likely occur.

“They were well aware of the potential consequences of their actions but stood strong for dignity, justice and respect,” the union’s said.

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