Hostess seeks $1.8 million in executive bonuses heading into bankruptcy
The money is intended as an incentive for 19 top-level managers to stay on with the Twinkies and Ding Dongs maker to oversee its liquidation following a battle with its second-largest union.
The payouts will be granted only if managers "achieve a set of specific tasks and goals within a specified time frame that are designed to speed and lower the cost of the wind-down," said Hostess spokesman Lance Ignon.
The maximum bonus amount, Ignon said, represents 0.07 percent of Hostess' revenue and 0.17 percent of the value of its assets and is below the average for bonuses in comparable bankruptcy cases. Hostess Chief Executive Greg Rayburn would be not be eligible for a bonus, Ignon said.
U.S. Bankruptcy Court Judge Robert Drain in White Plains, N.Y., has yet to make a decision on the request for bonuses. He also must decide whether to grant final approval for Hostess to sell its cult-favorite brands and shut down its operations for good.
Last week, Drain gave interim approval to the liquidation, which is expected to take about a year. Hostess' closure would result in more than 18,000 workers losing their jobs.
Hostess has received interest from a wide group of bidders including Hurst Capital and, reportedly, Sara Lee and Entenmann's owner Grupo Bimbo and Pabst Blue Ribbon backer C. Dean Metropoulos and Co.
The company is now "in active dialogue with 110 potential bidders, 70 of which have signed nondisclosure agreements," said Hostess spokesman Lance Ignon. The baker's investment bankers received 10 calls yesterday alone.
The company, which stopped contributing to its pension plans last year, will also ask the court to allow it to stop paying additional retiree benefits of $1.1 million a month, Ignon said.
The 82-year-old pastry maker entered bankruptcy for the second time in a decade in January. The Irving, Texas, company said this month that it could no longer function after a nationwide strike by the Bakery, Confectionery, Tobacco and Grain Millers Union.
Workers who walked out accused Hostess of slashing wages and benefits while bumping up executive pay.
The union joined the Bakery and Confectionery Union and Industry International Pension Fund earlier this week to ask Drain to hand over control of the liquidation process to a Chapter 11 trustee.
They accused the incumbent Hostess management of being "woefully unsuccessful in its reorganization attempts" and said a trustee would best protect creditor interests and "support an orderly and timely wind-down."