The U.S. Bankruptcy Court overseeing the Chapter 11 proceedings of Hostess Brands on May 14 denied the company’s bid to reject its collective bargaining agreements with the International Brotherhood of Teamsters, the union announced yesterday.
U.S. Bankruptcy Court Judge Robert Drain issued an oral decision Monday night, the union said.
“The judge specifically noted that the union and its advisers had accurately identified the company’s operational and business issues and were highly knowledgeable about the company,” the union said in its statement.
While it is not immediately clear where the decision leaves Hostess, Drain’s decision may have averted disaster for the company, at least for the time being. As reported, the Teamsters membership has already voted in favor of a strike if the company rejects the Teamsters’ labor agreements, and if that strike were to occur, all parties to the case agree, it would result in the company’s liquidation.
But the decision doesn’t necessarily bring the company and its unions closer to an agreement, which ultimately must occur if the company is going to find a way out of Chapter 11.
“While we agree with most of Judge Drain’s ruling, we recognize that it doesn’t solve Hostess’ problems,” the Teamsters said in a statement. “Unfortunately we’ve been bogged down in this legal process instead of trying to reach a resolution that all parties could support. We remain committed to finding a solution and urge the company and its lenders to do the same.”
As reported, on May 4 Drain issued a written order authorizing the company to terminate most of its collective bargaining agreements with the company’s second largest union, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCT). The company has not yet actually rejected the contracts, however, as negotiations with the BCT are continuing. As also reported, the BCT did not fight the company’s bid for authority to reject its agreements, saying it preferred to devote its resources toward negotiating a new agreement.
Meanwhile, a hearing remains on schedule for May 21 on the company’s motion to reject its remaining labor agreements with the company’s remaining nine unions.
Roughly 83% of Hostess’ 19,000 employees are unionized, and of those about 92% belong to either the Teamsters or the BCT.
Finally, bids from investors interested in the company were due last week. While no official word of the bids was released, the New York Post reported, citing anonymous sources, that KPS Capital Partners and at least one other investor made formal bids. The Post said the bids came in between $500-600 million. – Alan Zimmerman