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Hostess trial set for March

Questions loom over pensions, retiree benefits

The labor unions and benefit plans that dominate Hostess Brands Inc.’s official committee of unsecured creditors will face a challenge in a trial set to begin March 5 on whether the company can terminate existing pensions and retiree benefits.

The committee, appointed Jan. 18, has four members representing union pension or benefit plans, along with two others for the Teamsters and Stationary Engineers’ unions. The seventh member is trade supplier Caravan Ingredients Inc., based in Lenexa, Kan.

The committee selected New York law firm Kramer Levin Naftalis & Frankel as its counsel. Tom Mayer and Ken Eckstein will head up the legal team for the committee.

U.S. Bankruptcy Judge Robert D. Drain in White Plains, N.Y., laid down the schedule last week for Hostess’s motions to terminate existing union contracts and retiree benefits.

With regard to the Teamsters and bakery workers’ unions, the motions must be filed by Jan. 25. All investigations are to be completed by Feb. 22, in advance of a trial to begin March 5.

Hostess isn’t required to file motions to terminate contracts with other unions until March 28.

Hostess said it was compelled to undergo bankruptcy reorganization a second time as a result of “uncompetitive and unsustainable” union contracts, pension plans and health benefit programs. The Teamsters countered that bankruptcy was the result of management’s failure “to adjust their business plan to a changing and more competitive marketplace.”

Labor costs were “one of the few areas in which Hostess achieved its forecast,” the Teamsters said.

The prior reorganization gave control to hedge fund Ripplewood Holdings, the leader of a group that invested $130 million to finance the plan implemented in February 2009.

Assets are $982 million with liabilities totaling $1.43 billion, according to the new petition. Brand names included Wonder, Hostess, Merita, Dolly Madison, Drake’s and Butternut.

Hostess has 36 bakeries, 565 distribution centers and 570 outlets. During the prior bankruptcy, Irving, Texas-based Hostess had 41 bakeries, 600 distribution centers and 730 thrift stores.

The new case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains). The prior case was In re Interstate Bakeries Corp., 04-45814, U.S. Bankruptcy Court, Western District of Missouri (Kansas City).