NYI-4357899v7
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------------- In reHostess Brands, Inc.,
et al.,
1
Debtors.---------------------------------------------------------------x:::::::xChapter 11Case No. 12-_____ (___)(Jointly Administered)
MOTION OF THEDEBTORS PURSUANT TO11 U.S.C. §§ 105(A) AND 363(B)TO EMPLOY AND RETAIN FTI CONSULTING, INC.TO PROVIDE THE DEBTORS AN INTERIM TREASURER ANDADDITIONAL PERSONNEL
NUNC PRO TUNC
TO THE PETITION DATE
TO THE HONORABLEUNITED STATES BANKRUPTCY JUDGE:Hostess Brands, Inc. and its five domestic direct and indirect subsidiaries, asdebtors and debtors in possession (collectively, "Hostess" or the "Debtors"), hereby move theCourt for the entry of an order pursuant to sections 105(a) and 363(b) of title 11 of the UnitedStates Code (the "Bankruptcy Code") (i) authorizing the Debtors, pursuant to the terms andconditions of that certain agreement between FTI Consulting, Inc. and the Debtors dated January4, 2012 (as amended, the "Engagement Letter"),
2
to retain FTI Consulting, Inc. ("FTI") to provide an Interim Treasurer and Additional Personnel (as described below) for the Debtors nunc pro tunc to the date hereof (the "Petition Date");
3
and (ii) granting certain related relief. In
1The Debtors are the following six entities (the last four digits of their respective taxpayer identification numbers follow in parentheses): Hostess Brands, Inc. (0322), IBC Sales Corporation (3634), IBC Services, LLC (3639), IBC Trucking, LLC (8328),Interstate Brands Corporation (6705) and MCF Legacy, Inc. (0599).
2A copy of the Engagement Letter is attached hereto as Exhibit A.
3Nunc pro tunc retention is appropriate because this Motion was filed on the Petition Date, FTI will continueto provide services to the Debtors from and after the Petition Date and a hearing on this Motion will not beconducted, and an order will not be entered, until after the Petition Date.
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2support of this Motion, the Debtors rely upon the declaration of J. Robert Medlin(the "Medlin Declaration") attached hereto as Exhibit C and incorporated herein by reference,and in further support thereof, the Debtors respectfully represent as follows;
Background
1.
On the Petition Date, the Debtors commenced their reorganization cases by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code. By a motionfiled on the Petition Date, the Debtors have requested that their chapter 11 cases be consolidatedfor procedural purposes only and administered jointly.2.
The Debtors are authorized to continue to operate their business andmanage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of theBankruptcy Code.3.
Hostess Brands, Inc. is a Delaware corporation. Hostess Brands, Inc. isthe direct or indirect parent of the other Debtors, each of which is wholly-owned by HostessBrands, Inc. or one of its Debtor subsidiaries.
The Debtors maintain their corporate headquartersin Irving, Texas. Debtor IBC Sales Corporation owns principal real property assets in Elmsford, New York.4.
Founded in 1930, Hostess is one of the largest wholesale bakers anddistributors of bread and snack cakes in the United States. Today, Hostess sells an array of popular products under new and iconic brands such as Butternut®, Ding Dongs®, DollyMadison®, Drake's®, Home Pride®, Ho Hos®, Hostess®, Merita®, Nature's Pride®,Twinkies® and Wonder®. The Debtors operate 36 bakeries, 565 distribution centers,approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States.5.
The Debtors operate in a mature industry with high levels of competitionand related pricing pressures, thin operating margins and competitors with more sophisticated
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3technology and significant cost advantages. Over the past several decades and continuing to the present, the industry has experienced significant consolidation. As a result of this consolidation,the Debtors' primary national and large regional competitors are, at once, expanding their marketreach and consolidating operations through acquisitions and other means, thus widening their cost advantages. Importantly, the Debtors' competitors employ work forces that are notunionized or only partially unionized, which allow them to operate with significantly less burdensome operating restrictions and overall cost structures. As a direct result of their significant and long-standing unionized workforce, the Debtors have significant legacy costs, primarily in the form of pension and medical benefits obligations, that their competitors do notshare. Whether the Debtors can achieve long-term viability depends directly and substantially onthe Debtors' ability to achieve dramatic change to their labor agreements, with a correspondingmaterial reduction in their cost structure and legacy pension and medical obligations, and arestructuring of their capital structure. That is the purpose and the focus of these chapter 11cases.6.
The Debtors' production and distribution systems are heavily dependent onlabor-intensive processes involving, among other things, complicated and extensive local routedelivery systems that service nearly all of the continental United States and a national footprintof 36 bakeries. To staff this labor-intensive network, the Debtors employ approximately 19,000 people, of which 83% are members of unions who are subject to 372 collective bargainingagreements. The Debtors' unionized employees belong to 12 separate unions, but theoverwhelming majority of the Debtors' unionized workforce are members of either theInternational Brotherhood of Teamsters (the "IBT") or the Bakery, Confectionery, TobaccoWorkers & Grain Millers International Union (the "BCT").
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