Reuters: Regulatory News: Judge says Hostess can reject some union contracts

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Judge says Hostess can reject some union contracts May 7th 2012, 18:30 Mon May 7, 2012 2:30pm EDT May 7 (Reuters) - Hostess Brands Inc, the maker of Twinkies and Wonder Bread, has been given the go-ahead by a bankruptcy judge to reject certain union contracts and modify some retiree benefits, as it tries to work its way out of its second bankruptcy in less than a decade. Hostess can now reject some agreements with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), as the company tries to cut crippling legacy costs associated with its pension plans and massive debt levels. However, contracts that had expired before the start of the hearing, under which the union is still operating, cannot be modified or rejected by the company, Judge Robert Drain said in court documents published on Friday. This means that certain employees or pensioners can retain some benefits included in the expired contracts. Privately held Hostess and the BCTGM union are arguing about the expiry date of some of the agreements. A hearing to determine the validity of the contested agreements will be held on May 16, according to court documents. As part of its reorganization, Hostess has withdrawn from multi-employer pension plans, bringing down its cost of long-term worker benefits and altering the terms of its various collective bargaining agreements. These steps are needed to raise money to turn around its operations, the company said. Hostess, founded in 1930, has about $860 million in debt. It operates around 36 bakeries and employs about 19,000 people, a majority of whom are members of 12 unions. The company filed for its first bankruptcy in 2004, citing declining sales, rising ingredient costs, excess capacity and high worker benefit expenses. It tackled some issues - closing bakeries and simplifying some union contracts -- but failed to adequately deal with its huge pension and health obligations. Recent bankruptcies, including that of AMR Corp, the parent of American Airlines, have been marked by battles with trade unions to terminate jobs and labor costs as they look to drastically trim costs. The case is In re: Hostess Brands Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052. Link this Share this Digg this Email Reprints

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