No more Twinkies?

[ryoder 1,590]

Anyone ever take a good look at the Twinkie label?

"There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones.

[ryoder 1,590]

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The 18,000 employees got fucked, while investors on both sides get a sweeter deal.

Don't worry; They will be OK; Well, at least a few will: http://gawker.com/5961444/dont-worry-hostess-top-executives-still-got-richer-as-company-collapsed

"There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones.

[billvon 3,069]

>The company got exactly what it wanted; a brand name they can sell for more than
>what it was previously worth.

That makes zero sense. If they could sell the brand name and make more money they would have regardless of what their labor wanted. If they couldn't, then driving the company into bankruptcy harms only them (specifically harms all the people who hold shares in the company and make their money from it.) The only way it makes sense is if you postulate that these people are just plain evil and want to both destroy their own livelihood and hurt as many people in the process as they can. And that's nanothermite territory.

I am all for workers being able to organize to take actions against companies - including driving them out of business. Their decision, they live with the consequences.

>The "new" company has all the upside of the old company, but is unburdened of any
>previous agreements it made and the new buyers would absolutely be willing to pay a
>premium for that since it works to their (the investors) benefit in the long term.

I don't think you understand how bankruptcy works. It's not a "reset" where all your debts get cancelled.

> The 18,000 employees got fucked, while investors on both sides get a sweeter deal.

The 18,000 employees systematically fucked themselves.

[jcd11235 0]

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If they could sell the brand name and make more money they would have regardless of what their labor wanted.

It looks like that's exactly what they're doing. Bankruptcy is merely a means to that end. Bankruptcy may be a dirty word to many consumers, but to businesses, it's just a tool to leverage when appropriate, and Hostess' executives deem it appropriate. Like Quade said, "The 18,000 employees got fucked, while investors on both sides get a sweeter deal." Businesses have been utilizing bankruptcy to screw their labor for years. This is neither the first nor last time we see it happen.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[billvon 3,069]

>Bankruptcy may be a dirty word to many consumers, but to businesses, it's just a tool
>to leverage when appropriate, and Hostess' executives deem it appropriate.

Quite literally true. But that's akin to saying "letting the student go in is a tool that AFF instructors can use when appropriate."

People use the term "bankruptcy" like they use the term "he can just write it off" as if it means there is no cost associated with it, or through clever tricks someone else pays for it. Not really the case.

[jcd11235 0]

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You really think the investors wanted to drive the company into the dirt after that type of offer to the rank and file?

Investors want whatever maximizes the value of their stock. If the stock is most valuable if the company is liquidated, then that's what rational stockholders want management to do.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jcd11235 0]

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use the term "bankruptcy" like they use the term "he can just write it off" as if it means there is no cost associated with it, or through clever tricks someone else pays for it. Not really the case.

Bankruptcy is often the most profitable option for a business. In fact, that's essentially the only reason for any business to file for bankruptcy. Heck, companies like Bain Capital have made a successful business model out of buying companies and steering them into bankruptcy for profit.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[weekender 0]

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>I sort of agree with you. The unions didn't understand they were being played as pawns.

Pawns? They got what they wanted. They didn't want to work under those conditions/agreements, so now they don't have to.

Yes, pawns. The company got exactly what it wanted; a brand name they can sell for more than what it was previously worth. It's worth more today because the exact same brand and facilities don't have to honor a previous contract which included wages above the minimum and other employee benefits. The "new" company has all the upside of the old company, but is unburdened of any previous agreements it made and the new buyers would absolutely be willing to pay a premium for that since it works to their (the investors) benefit in the long term. The 18,000 employees got fucked, while investors on both sides get a sweeter deal.

that makes no sense to me. you cannot sell a brand for more than you can sell a fully functioning business. as i stated before if that was the case, then why invest in it and try to run the factory for a year? the investors put money into the business and will get less out when it is sold off in peices. your math is completely the opposite of everything ive learned in 20 years of banking.

perhaps i am wrong. perhaps all my experience in equity trading and investment banking is wrong. perhaps everything i have witnesed in the last twenty so odd years was completely incorrect. i suppose there is a chance everyone i know in banking is and has been doing it wrong all this time. all you have to do is buy a company, declare bankruptcy and watch the cash roll in. OR perhaps you have no idea what your talking about and cannot read even a simple balance sheet.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[weekender 0]

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use the term "bankruptcy" like they use the term "he can just write it off" as if it means there is no cost associated with it, or through clever tricks someone else pays for it. Not really the case.

Bankruptcy is often the most profitable option for a business. In fact, that's essentially the only reason for any business to file for bankruptcy. Heck, companies like Bain Capital have made a successful business model out of buying companies and steering them into bankruptcy for profit.

that makes no sense to me. that is the exact opposite of what private equity does in my experience. Bain and other private equity companies invest and attempt to return the business to profitability. if so, they can sell it or take it public for a profit. they declare bankruptcy only to salvage some of their investments to move on to another project. i have never seen someone turn a profite by declaring bankruptcy.

this site has really opened my eyes to how little i understand about banking and equity. i suppose i am the only person here who thinks you must have earnings to turn a profit. what a fool i have been all these years.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[jcd11235 0]

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you cannot sell a brand for more than you can sell a fully functioning business.

Actually, it can be done. Berkshire Hathaway often invests in businesses when the market price of the stock is less than the company is worth if liquidated.

The past few days have undoubtedly increased the value of the Twinkie name. Bankruptcy proceeding will require all interested parties to bid against one another in a now or never purchase opportunity, driving the price higher than what the names & recipes would bring if prospective buyers were courted individually.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[jgoose71 0]

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OR perhaps you have no idea what your talking about and cannot read even a simple balance sheet.

I think this is more in line than anything else. The more you get into the details, the more you realize that unions killed Hostess.

The "Bane style Ronmey Capitalist" talking point goes out the window when you look at the balance sheets and the details of the arguments.

Hostess is over a billion dollars in debt and is currently bleeding $2 million a week. They have been hamstrung by 256 collective bargaining agreements from several different labor unions.

Things that they were trying to negotiate out of were suck common sense items like allowing Wonder bread and Twinkies to be allowed to be delivered in the same truck. They quite literally had 6 people doing the job of one person, at union wages (which include skyrocketing health care and pensions....)

Couple that with the government now trying to regulate what you eat in the new "Health Fad" sweeping the nation, and it's a loosing battle.

Did I mention the $1 billion dollar debt? When filing chapter 11, the company assets are going to be liquidated and sold off to pay those debts first, and what ever is left over will be spread out. The investors that tried to make the company solvent for one more year while corporate tried to negotiate with the unions with a huge capitol infusion are going to loose their asses.....

The only people that are going to still have a job or cash after this is the union bosses...

"There is an art, it says, or, rather, a knack to flying. The knack lies in learning how to throw yourself at the ground and miss."
Life, the Universe, and Everything

[jcd11235 0]

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i have never seen someone turn a profite by declaring bankruptcy.

The only reason any business ever declares bankruptcy is because it is the most profitable option, even if that only means the smallest loss.

Of course, not all investors are treated equally during a company's bankruptcy. Some will come out of it much better than others.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[kallend 2,106]

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>I sort of agree with you. The unions didn't understand they were being played as pawns.

Pawns? They got what they wanted. They didn't want to work under those conditions/agreements, so now they don't have to.

Yes, pawns. The company got exactly what it wanted; a brand name they can sell for more than what it was previously worth. It's worth more today because the exact same brand and facilities don't have to honor a previous contract which included wages above the minimum and other employee benefits. The "new" company has all the upside of the old company, but is unburdened of any previous agreements it made and the new buyers would absolutely be willing to pay a premium for that since it works to their (the investors) benefit in the long term. The 18,000 employees got fucked, while investors on both sides get a sweeter deal.

that makes no sense to me. you cannot sell a brand for more than you can sell a fully functioning business.

But Hostess is NOT a fully functioning business. It owes nearly $1BILLION just to its pension plan. By declaring bankruptcy it's offloading its huge debts onto its creditors.

The function of management is to manage the company. That is not the union's job. I notice that management tried to pad its pay before the declaration of bankruptcy.

Hostess has been operating in bankruptcy since January, its second reorganization in less than a decade. The company faced a changing market in which customers began to worry more about things like empty calories and ingredients that sounded more like they were mixed up in a chemistry lab than a kitchen.

Management, too, deserves some of the blame. It tried to take its turn at the trough, padding executives’ paychecks ahead of the bankruptcy filing. While those pay packages were later rescinded, it didn’t set an amiable tone for talks with creditors or labor groups. It also spoke to a far bigger problem that plagued Hostess: a lack of innovation. The company for years simply relied on its well-established brands, ignoring rising consumer concerns about unhealthy snacks and mounting competition from other snack makers.

...

The only sure way to survive a canopy collision is not to have one.

[weekender 0]

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>I sort of agree with you. The unions didn't understand they were being played as pawns.

Pawns? They got what they wanted. They didn't want to work under those conditions/agreements, so now they don't have to.

Yes, pawns. The company got exactly what it wanted; a brand name they can sell for more than what it was previously worth. It's worth more today because the exact same brand and facilities don't have to honor a previous contract which included wages above the minimum and other employee benefits. The "new" company has all the upside of the old company, but is unburdened of any previous agreements it made and the new buyers would absolutely be willing to pay a premium for that since it works to their (the investors) benefit in the long term. The 18,000 employees got fucked, while investors on both sides get a sweeter deal.

that makes no sense to me. you cannot sell a brand for more than you can sell a fully functioning business.

But Hostess is NOT a fully functioning business. It owes nearly $1BILLION just to its pension plan. By declaring bankruptcy it's offloading its huge debts onto its creditors.

The function of management is to manage the company. That is not the union's job. I notice that management tried to pad its pay before the declaration of bankruptcy.

Hostess has been operating in bankruptcy since January, its second reorganization in less than a decade. The company faced a changing market in which customers began to worry more about things like empty calories and ingredients that sounded more like they were mixed up in a chemistry lab than a kitchen.

Management, too, deserves some of the blame. It tried to take its turn at the trough, padding executives’ paychecks ahead of the bankruptcy filing. While those pay packages were later rescinded, it didn’t set an amiable tone for talks with creditors or labor groups. It also spoke to a far bigger problem that plagued Hostess: a lack of innovation. The company for years simply relied on its well-established brands, ignoring rising consumer concerns about unhealthy snacks and mounting competition from other snack makers.

No it is not a fully fuctioning company, agreed. i keep pointing out that if it was, it could be sold for a profit. the private equity people invested in hopes of turning it into a profitable business so they could take it public or sell it. others seem to believe they make money by investing in it, declaring bankruptcy and selling off the parts. That works well when writing a screenplay. Wall Street the movie is a good example. unfortunately i cannot understand how that works in a real world situation. In my experience, that is not how investment banking works. in my reality a balance sheet involves math that must add up.

you and others feel the need to assign blame. i do not, i do not care. i am solely discussing what the motives of the private equity investors were. i would venture to guess that management made mistakes running Hostess. It seems highly unlikely to me that they ran a perfect business that some how went bankrupt without them doing no wrong. Maybe like many here, they have found the magic way to turn a profit by having no earnings.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[weekender 0]

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you cannot sell a brand for more than you can sell a fully functioning business.

Actually, it can be done. Berkshire Hathaway often invests in businesses when the market price of the stock is less than the company is worth if liquidated.

The past few days have undoubtedly increased the value of the Twinkie name. Bankruptcy proceeding will require all interested parties to bid against one another in a now or never purchase opportunity, driving the price higher than what the names & recipes would bring if prospective buyers were courted individually.

No they do not. or at least, no they do not as i understand finance and investing.

i believe you have a misunderstanding of what Book Value means and how it is used when building a financial model and creating a valuation.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[rehmwa 2]

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The function of management is to manage the company.

I'll refer you to a post above - how much do you have to tie up management before one can't blame them?

You can't assume they have total control and yet still cry and stamp your feet about unions being powerless. The stuff below is an example that's all over the place. union shops = suicide


"Things that they were trying to negotiate out of were suck common sense items like allowing Wonder bread and Twinkies to be allowed to be delivered in the same truck. "

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[billvon 3,069]

>Bankruptcy is often the most profitable option for a business.

Again, in the same way that letting a student go in is often the best solution for an AFF-I.

[weekender 0]

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i have never seen someone turn a profite by declaring bankruptcy.

The only reason any business ever declares bankruptcy is because it is the most profitable option, even if that only means the smallest loss.

Of course, not all investors are treated equally during a company's bankruptcy. Some will come out of it much better than others.

Your wording is a bit confusing but i believe i get your point. If your point is to say that sometimes the best decision is to take the smallest loss then i agree with you.

With that said, you must read the line of mine you quoted in the context for which it was written. to be more clear: i have never seen a private equity investor turn a profit after having to declare bankruptcy and liquidate a company. in this case i am using the word profit to reflect the difference between the original investment and the sale price of the company or its parts. i have never seen it worth more than the original investment in liquidation. the bankruptcy is just to cut your losses. so, I believe we are in agreement.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[kelpdiver 2]

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you cannot sell a brand for more than you can sell a fully functioning business.

Actually, it can be done. Berkshire Hathaway often invests in businesses when the market price of the stock is less than the company is worth if liquidated.

Uh, WTF?

Bershire buys companies it feels are undervalued and where it can act to fix the problems that lead to that poor stock valuation. That's effectively the same approach taken by many P/E funds, like the one that bought Hostess and spent the last year trying to turn it around. To think they spent that time to prop up the price is widely naive.

We will ultimately see what Bimbo (or someone else) actually pays, but I'd say it's 10:1 that selling the brand will represent a substantial loss for the P/E fund. A brand alone isn't the same as having a functioning production line and established sale space in the grocery store. Any buyer has to start from scratch on both of these, which are serious barriers to entry.

Mother's cookies is the most recent example that comes to mind, but I could not identify what Kellogg paid (not disclosed in press releases). It's key to note that they only selectively bough - just the name and recipes, no other assets. Hostess will also be selectively bought - only the star products.

[Rick 67]

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The only people that are going to still have a job or cash after this is the union bosses...

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According to the Department of labor web site quite a few of the union officers are making upwards of 200k a year.

You can't be drunk all day if you don't start early!

[kallend 2,106]

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>Bankruptcy is often the most profitable option for a business.

Again, in the same way that letting a student go in is often the best solution for an AFF-I.

Very poor analogy. Most AFFI's are too ethical to do that for their own enrichment. I don't think hedge fund managers and other similar vermin people have the same level of ethics.

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The only sure way to survive a canopy collision is not to have one.

[kallend 2,106]

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The function of management is to manage the company.

I'll refer you to a post above - how much do you have to tie up management before one can't blame them?

You can't assume they have total control and yet still cry and stamp your feet about unions being powerless. The stuff below is an example that's all over the place. union shops = suicide


"Things that they were trying to negotiate out of were suck common sense items like allowing Wonder bread and Twinkies to be allowed to be delivered in the same truck. "

And I refer you to 2 simple facts:

1. The function of management is to manage the company.

2. Taxpayers (like you and I) will undoubtedly be on the hook for a significant part of the unfunded pension obligation.

So basically the managers/owners are getting someone else to pay their debts.

...

The only sure way to survive a canopy collision is not to have one.

[billvon 3,069]

>Very poor analogy. Most AFFI's are too ethical to do that for their own enrichment.

That makes it a good analogy, actually. While the outside world thinks that all skydivers are reckless yahoos (an image which is reinforced by the popular media) people in the skydiving community know that AFF-I's are too ethical to do that for their own enrichment. And more importantly know that there really isn't any way to enrich yourself by having your students go in.

> I don't think hedge fund managers and other similar vermin people have the
>same level of ethics.

Non-skydivers think the same of you; it's easy to accept the image that's prevalent in popular culture if you don't know a subject well.

[rehmwa 2]

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The function of management is to manage the company.

I'll refer you to a post above - how much do you have to tie up management before one can't blame them?

You can't assume they have total control and yet still cry and stamp your feet about unions being powerless. The stuff below is an example that's all over the place. union shops = suicide


"Things that they were trying to negotiate out of were suck common sense items like allowing Wonder bread and Twinkies to be allowed to be delivered in the same truck. "

And I refer you to 2 simple facts:

1. The function of management is to manage the company.

2. Taxpayers (like you and I) will undoubtedly be on the hook for a significant part of the unfunded pension obligation.

So basically the managers/owners are getting someone else to pay their debts.

clearly

and one of the best management philosophies, in this case (for the owners, management and labor) would have been to not have or to eliminate as much unreasonable union agreements as possible - certainly they did fail to do that - now, or pre-emptively

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Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[lawrocket 3]

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You really think the investors wanted to drive the company into the dirt after that type of offer to the rank and file?

Investors want whatever maximizes the value of their stock. If the stock is most valuable if the company is liquidated, then that's what rational stockholders want management to do.

If the company is liquidated, the stock then evaporates and no longer exists once the payment has been made. Selling off stock is cutting a losses. You might as well say, "A person who has a foot amputated is simply trying to maximize a quality of life." Yes, while this is true, few people would view amputation as a good thing unless things are really bad without it.

Prudent investment usually does not mean "buy stocks that will be liquidated in bankruptcy."

My wife is hotter than your wife.