Hostess execs to get bonuses as part of bankruptcy

(Photo credit: John R. Coughlin/CNNMoney)

(Photo credit: John R. Coughlin/CNNMoney)

Updated 3:15 p.m. Monday, November 19:

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 pay cuts 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.

Original story earlier Monday, November 19, 2012:

NEW YORK (CNNMoney) — Hostess Brands will ask a bankruptcy judge Monday for approval to shut down the company and pay $1.75 million in executive bonuses.

Unions representing workers at the maker of Twinkies, Wonder Bread and Drake’s snacks are arguing against the bonuses.

But there appears little the unions can do in court to block the shutdown of Hostess or save the 18,500 jobs at the company.

At a court hearing set for 2 p.m. ET, the company will ask U.S. Bankruptcy Court Judge Robert Drain in New York to approve retention bonus payments to executives expected to oversee the shutdown of Hostess.

“The cessation of … operations is not a simple matter of turning off the lights and shutting the doors,” the company wrote in a court filing. “A freefall shutdown and fire sale liquidation” could result in damaged production equipment and the “improper disposal” of waste, the company added.

Check out related stories and photos from the Hostess shutdown – click here.

Under the plan, bonuses ranging from $7,400 to $130,500 will be paid to 19 executives. The company argues the bonuses are below market rates for such payments.

But the unions, which blame mismanagement for the company’s demise, say the bonuses are unjustified and should be rejected by the judge.

There will be some discussion at the hearing about the sales process that will be used to dispose of company assets. 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 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.

The unions filed various motions over the weekend and Monday regarding the wanting to see details of the sales process, and also motions seeking to protect pension funds and salaries under previous contracts.

But as of Monday morning no motions had been filed seeking to block the liquidation plan itself. A bankrupt company has a virtually absolute right to move to liquidate a company, according to bankruptcy experts.

And 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, whose Nov. 9 strike prompted Hostess management to announce the shutdown, issued a statement Saturday saying that mismanagement over a number of years is the reason the company is shutting down, not the strike.

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.

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, it’s unlikely that the current employees will be rehired to produce or deliver those products.

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