Days of the Twinkie may be numbered

I meant partner in the sense of making business decisions, and taking the consequences.

Grocery store shelf-space

as you can see reports that hostess died of lack of sales are greatly exaggerated.

By late 2011, Hostess was getting, well, creamed. Its sales last year -- $2.5 billion -- were down about 11% from 2008 and down 28% from 2004.

Away from the sideshow over executive pay, the parties continued to wrangle in bankruptcy litigation. They've been at it for months, in court and in closed-door negotiations.

On one side are the Teamsters, and on the other are the two hedge funds, Silver Point and Monarch.

Ripplewood is pretty much out of the picture by now, except to the extent it can eventually persuade the bankruptcy judge to toss it a bone.

While Ripplewood retains some debt, its equity is so far under water that it might as well be gone. It doesn't attend negotiating sessions with the Teamsters -- such is the view from the bottom of the sea. Hostess is at the table but has resigned itself to being a mediator of sorts, with its interests subordinated to the hedge funds, which hold the senior secured debt.

On exiting the first bankruptcy, Hostess's total debt load was nearly $670 million. That was well above what it went into bankruptcy with in the first place -- an unusual circumstance that the company justified on expectations of "growing" into its capital structure.

But the company was dead wrong. Its debt sowed the very seeds of the next bankruptcy. Looking back on the decision to reinvest in Hostess in the first bankruptcy, one of the lenders now says, "If you look in the dictionary at the definition of throwing good money after bad, there should be a picture of Hostess beside it."

Even if the union can reach a deal with Hostess and investors, all parties would still have to turn to the wage concessions and work-rule changes that the company insists on -- and in return for which the Teamsters want a piece of the company.

For those panicked consumers considering a Twinkie bake set on eBay for some extortionate price, a word of caution.

No matter the outcome of the mediation session between Hostess Brands and the Baker, Confectionary, Tobacco Workers and Grain Millers International Union, Twinkies, Ho Hos, and Sno Balls may yet return to grocery store shelves.

Since Hostess announced last week that it planned to file for Chapter 11 bankruptcy – saying a two-week strike by the bakery union caused irreparable financial damage – a rush for its iconic sugary snacks has hit supermarkets and convenience stores across the country.

[Yet that very outpouring of gastronomical grief could be a saving grace. Even though Hostess sales are not as robust as they were in the past, the products still possess strong cultural value – and many companies are apparently eager to purchase Hostess assets if the company continues with its motion to file for bankruptcy Wednesday.

“There is a consumer reaction that comes viscerally when you get rid of an iconic brand," says Susan Fournier, a professor of marketing and an authority on brand research at Boston University School of Management. "That’s just the evidence these brands have resonance, they have meaning, they have value, and [consumers] are going to miss them.”

Top of the suitor list is C. Dean Metropoulos and Co., a private-equity firm based in Greenwich, Conn., that specializes in purchasing heritage brands, such as Pabst Blue Ribbon beer, Bumble Bee Tuna, Chef Boyardee pasta, and PAM cooking spray and rebooting them.

Hostess Brands has been surprised by the amount of interest its brands have received from potential bidders, CEO Greg Rayburn said Thursday evening.


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But while there’s demand for buying the rights to Twinkies, Ho Hos and Drakes coffee cakes, not one of the 110 potential buyers have raised the prospect of buying the whole sweet shebang, he said.

Rayburn, speaking shortly after a court hearing, said the number of bidders has risen sharply: on Wednesday there were 80 and in just 24 hours there were 110 looking at the liquidating assets.

He said there have been signs of interest from regional bakers looking to add assets and from large customers and supermarket chains looking for brands they see customers clamoring for.

“It’s a broad spectrum of buyers,” Rayburn said while speaking at a conference at the New York Stock Exchange hosted by media outlet The Deal. ” I wouldn’t have predicted our customers would be bidders.