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Hostess to seek approval for executive bonuses


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#1 concert andy

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Posted 29 November 2012 - 01:51 PM

http://finance.yahoo...Y3Rpb25z;_ylv=3


NEW YORK (AP) -- Hostess Brands Inc. plans to ask for a judge's approval Thursday to give its top executives bonuses totaling up to $1.8 million as part of its wind-down plans.

The maker of Twinkies, Ding Dongs and Ho Hos says the incentive pay is needed to retain the 19 managers during the liquidation process, which could take about a year. Two of those executives would be eligible for additional rewards depending on how efficiently they carry out the liquidation.

Hostess is also seeking final approval for its wind-down, which was approved on an interim basis last week.

The process includes the quick sale of its brands, which also include Wonder Bread. Hostess says it has received a flood of interest in the brands.

The company's bankruptcy means loss of about 18,000 jobs.

#2 TakeAStepBack

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Posted 29 November 2012 - 02:04 PM

1.8 million divided by 19 and then taxed. After the liquidation and sell off of the rights to its products. I really don't see any problem here.

#3 concert andy

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Posted 29 November 2012 - 02:10 PM

1.8 million divided by 19 and then taxed. After the liquidation and sell off of the rights to its products. I really don't see any problem here.


So you do not see a problem with these 19 getting say 75K bonus for a few months of work, while the rest of the company loses all of their jobs?

#4 concert andy

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Posted 29 November 2012 - 02:12 PM

PS. I assume that is on top of their regular salary. Since it is referred to as a Bonus.

#5 MeOmYo

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Posted 29 November 2012 - 02:14 PM

So you do not see a problem with these 19 getting say 75K bonus for a few months of work, while the rest of the company loses all of their jobs?


It is not a few months, it is about a year. Also, they need incentive to retain personnel for the liquidation.

#6 TakeAStepBack

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Posted 29 November 2012 - 02:14 PM

No, because as the article stated, the process could take about a year and they need to liquidate the company. The rest of the company went down, it's over. So the bonus comes from the liquidation. The fact they have to ask a judge permission makes me :funny1: though.

it's not like Hostess received 20 billion in taxpayer dollars and then gave out multi million dollar bonuses to 1 or 2 Execs and evaded taxes.

#7 concert andy

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Posted 29 November 2012 - 02:26 PM

I just think when you are firing 15K people, no one should get extra money just to stay around till the bitter end.

http://articles.chic...gregory-rayburn

#8 TakeAStepBack

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Posted 29 November 2012 - 02:33 PM

That's fine. I see no problem with it. The bonus comes from the liquidation. Liquidations require a lot of coordination and management/dealings to conclude. Including sellign the rights/recipes of their products. So the money these people receive is based upon that effort. It's a lot different than say Lehman Bros. golden parachutes or GMs turn from General to Govt. Motors.

#9 MeOmYo

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Posted 29 November 2012 - 02:40 PM

I just think when you are firing 15K people, no one should get extra money just to stay around till the bitter end.

http://articles.chic...gregory-rayburn


I agree. BUT you also need to retain staff to handle the liquidation. If you do not provide incentive, these people will leave at first chance and the liquidation process could be drawn out and cost more than the 1.8 mil used for retention.

#10 TakeAStepBack

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Posted 29 November 2012 - 02:42 PM

I agree. BUT you also need to retain staff to handle the liquidation. If you do not provide incentive, these people will leave at first chance and the liquidation process could be drawn out and cost more than the 1.8 mil used for retention.


:jimy:

#11 concert andy

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Posted 29 November 2012 - 02:44 PM

I agree. BUT you also need to retain staff to handle the liquidation. If you do not provide incentive, these people will leave at first chance and the liquidation process could be drawn out and cost more than the 1.8 mil used for retention.


Agreed, but currently my old job is in process of closing down shop after being bought. 3/4 of the place are losing their jobs on 12/7, and I have heard a few have left just like you mentioned, but as many others who are still there and no prospects. Gotta stay to the end.

Wouldn't employees get a severance at the end (reason one friend is staying til the end).

I guess this is where I am confused. Severance / Bonus. Not the same thing, but incentives enough.

#12 MeOmYo

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Posted 29 November 2012 - 02:58 PM

Severance is up to the employer as I understand it. So they may or may not. Also, while a severance is attractive on the surface, your future is still in question and to many it doesn't compare to remaining gainfully employed.

#13 Tim the Beek

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Posted 29 November 2012 - 03:04 PM

I find it distasteful that people who managed the company into the ground (albeit with help from the rank and file) are getting rewarded, but I understand and support the reasoning behind it. Back in my wild an wooly accountant days, I worked for a company which was acquired by another. No one needs 2 accounting departments, so we got laid off. Some of us got a sweeter severance package which was contingent on our staying with the company through the transition.

Makes sense to me, even if I don't like it.

#14 Depends

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Posted 29 November 2012 - 03:06 PM

I have been involved with this.
Incentives are being paid by the creditors, in essence. The company is bankrupt, they have no money. So the creditors have to liquidate the assets. Well you need someone to do it, and they have to know the company. Other people, Liquidation firms come in too, and they get bonuses too.

The credtors see it this way. "I can maximize my return by paying people a bonus, I will get more $$ back if these people stay until the end."

It is not Hostess that is paying those bonuses. That money comes directly out of what the creditors get

#15 concert andy

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Posted 29 November 2012 - 03:08 PM

Severance is up to the employer as I understand it. So they may or may not. Also, while a severance is attractive on the surface, your future is still in question and to many it doesn't compare to remaining gainfully employed.


That said, no severance or vacation pay for any of these people:

According to a letter sent to employees, workers will not receive severance pay or pay for unused vacation time. Hostess is directing employees to COBRA for continuing medical insurance coverage.


Source:
http://money.cnn.com...jobs/index.html

#16 Tim the Beek

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Posted 29 November 2012 - 03:14 PM

That said, no severance or vacation pay for any of these people:


Source:
http://money.cnn.com...jobs/index.html


Like I said, I don't like it. But from a logical standpoint, it makes sense.

#17 Depends

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Posted 29 November 2012 - 03:15 PM

Severence is RARE when bankrupt. There is NO money for the creditors, let alone employees

Remember WHY a company is bankrupt. It has X dollars, and owes many times X.
Now creditors are due thier money, but there isn't enough to go around. So a court decides who gets what. Severence would be low on the list.

Counter to that, the company must give 90 day notice that it is closing. So the employees have 90 days to find other employment.

#18 concert andy

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Posted 29 November 2012 - 03:30 PM

I understand all of it, like Tim, I do not like it.

#19 PeaceFrog

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Posted 30 November 2012 - 12:53 AM

we change Presidents every 4 or 8 years, why are these people so special that someone else can't do their job? They're the ones who bankrupted the company in the first place.

there's a lot of people out of work right now who would gladly liquidate the company for them, I'm sure. who really cares how long it takes? Why is that even a concern?

#20 deadheadskier

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Posted 30 November 2012 - 12:59 AM

That's fine. I see no problem with it. The bonus comes from the liquidation. Liquidations require a lot of coordination and management/dealings to conclude. Including sellign the rights/recipes of their products. So the money these people receive is based upon that effort. It's a lot different than say Lehman Bros. golden parachutes or GMs turn from General to Govt. Motors.


so what happens if the bonuses aren't granted and the employees who were to receive them aren't retained through the liquidation process?

#21 PeaceFrog

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Posted 30 November 2012 - 01:00 AM

exactly. nothing.

#22 TakeAStepBack

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Posted 30 November 2012 - 01:09 AM

so what happens if the bonuses aren't granted and the employees who were to receive them aren't retained through the liquidation process?


The process could be delayed, costing even more money and energy, as another poster indicated.

#23 Tim the Beek

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Posted 30 November 2012 - 01:10 AM

so what happens if the bonuses aren't granted and the employees who were to receive them aren't retained through the liquidation process?


Then knowledge of the business, facilities, accounting practices, etc. leaves with them, and someone has to be hired to figure it all out, which will take longer, and conceivably end up costing more, is my guess.

#24 Tim the Beek

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Posted 30 November 2012 - 01:13 AM

And acknowledging, again, that I don't like that it's happening, I will say from experience (though not with a bankruptcy, but the takeover I mentioned earlier), that reporting to a job every day when most of your coworkers are gone, and when you know your employment is limited, isn't a particularly pleasant way to spend your workdays.

#25 Tim the Beek

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Posted 30 November 2012 - 01:14 AM

I can only imagine that unwinding a company you tried to make work under those circumstances is less pleasant still.

#26 PeaceFrog

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Posted 30 November 2012 - 01:16 AM

Then knowledge of the business, facilities, accounting practices, etc. leaves with them, and someone has to be hired to figure it all out, which will take longer, and conceivably end up costing more, is my guess.


and this is a big problem? why?

maybe it'll cost less because there will be fresher minds on the job.

#27 Tim the Beek

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Posted 30 November 2012 - 01:23 AM

If you were attempting to make the business work, I can see that to some extent. But to have an orderly, efficient unwinding, it makes sense not to have people trying to figure out what the prior people were up to. Don't think it will cost less if it's going to take a lot longer to get people up to speed before they actually start on the work at hand.

Also, I have to figure it would be harder to get people to come on for a short stint, than to keep the ones you have around a little longer.

#28 PeaceFrog

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Posted 30 November 2012 - 01:25 AM

it should be up to the stockholders.

#29 Tim the Beek

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Posted 30 November 2012 - 01:27 AM

Creditors and the courts are in charge now...the company's finished, and the shareholders' equity interest is gone.

#30 deadheadskier

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Posted 30 November 2012 - 01:27 AM

Then knowledge of the business, facilities, accounting practices, etc. leaves with them, and someone has to be hired to figure it all out, which will take longer, and conceivably end up costing more, is my guess.


You're right; it will cost more. It will cost more to the venture capitalists cashing out. Because now they have to pay those people instead of getting a court injunction that allows a percentage of the liquidation funds to go towards paying the executives retained.

The VCs are hopping out of this deal with huge earnings. They're trying to maximize their earnings by petitioning the bankruptcy courts to allow liquidation fund transfer towards retaining Hostess execs through the liquidation.

So, instead of the VCs being responsible for paying the needed personnel to execute the liquidation, they get to write it all off. VCs make more, the White Collar Execs get paid handsomely for the next year while they look for a new job.

Now the union hostess employees stand to gain nothing monetarily by having these bonuses rejected by the courts. The only satisfaction they get is that the VCs who were largely responsible for bleeding this company to the grave will now get less of the pie.

The burden of the liquidation should fall 100% on the VCs. They own it. Screw them for trying to get creative with accounting to reduce their liabilities.

Again, doesn't help the Hostess employees who lost their jobs, but it's the right thing to allow happen IMO. You bought it, you own it.

#31 deadheadskier

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Posted 30 November 2012 - 01:29 AM

it should be up to the stockholders.


There are no stockholders. Hostess was a privately held Venture Capitalist owned company.

#32 PeaceFrog

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Posted 30 November 2012 - 01:31 AM

so, basically, the creditors get screwed if they approve this?

#33 Tim the Beek

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Posted 30 November 2012 - 01:32 AM

Source for that, DHS? I'm not all that familiar with this particular case, and am speaking in general terms...are you talking about VC people who have an equity stake, or who loaned the company money to try to make it work?

#34 deadheadskier

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Posted 30 November 2012 - 01:33 AM

so, basically, the creditors get screwed if they approve this?


No, the Venture Capitalists get relieved of paying hostess executives to execute the liquidation. That is what this is about.

#35 Tim the Beek

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Posted 30 November 2012 - 01:36 AM

Are they (the executives) not being paid out of assets which remain in the corporation?

#36 PeaceFrog

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Posted 30 November 2012 - 01:42 AM

well, I'm obviously uncertain of all the details, and I'm not sure where the money is coming from... but these CEOs don't deserve extra money just to do their job.

$125,000 a month is nothing to turn your nose up at (the average pay of these executives). And why would they be in such high demand when they already bankrupted one company and we have a 7.9% unemployment rate?

If they had done a satisfactory job in the first place, the company would still be alive.

I just saw that the court approved it, but my first impression is that it's bullshit.

#37 Tim the Beek

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Posted 30 November 2012 - 01:52 AM

I don't like it, but it generally makes sense to do it...again because of the knowledge the people you're retaining have.

There may be some sort of detail I'm not aware of though...

#38 deadheadskier

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Posted 30 November 2012 - 01:56 AM

Are they (the executives) not being paid out of assets which remain in the corporation?


I maybe wrong, but I think you are confusing the "executives" with the "Venture Capitalists". The Executives who are going to benefit from this deal aren't the "bad guys"; they're just being portrayed as such because they're the only people who get to keep a job and will be doing so at a handsome paycheck while tens of thousands of people lose lower paying jobs.

There is no money left; only the physical assets of the company (whether factory or intellectual(recipes etc.), which the VCs put up as collateral to back the debt to banks. The VC investment to prop it all up was the senior debt, the initial working capital,(not debt capital) to keep the business going short term and the VCs get to cash it out because they had the collateral in place. They're doing such to avoid close to a billion dollars in pension liabilities and now to avoid paying a couple mil in salaries to the executives to execute the liquidation.

This is typical vulture VC economics playing games with current bankruptcy law.

#39 deadheadskier

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Posted 30 November 2012 - 02:08 AM

so what happens if the bonuses aren't granted and the employees who were to receive them aren't retained through the liquidation process?


and round again back to my initial question.

So what would happen?

Well, the VCs are already out with their cash. They're the ones who should be responsible for paying execs to execute liquidation. But, that doesn't happen.

Well, shit, if the VCs aren't going to pay people to do the job, now who pays for it? The banks? Hell no, they're not going to pay for it. They'll use the asset sales to pay these people, which reduce their return on the initial collateral debt offered by the VCs, so the banks take a bigger loss to write off without having to have the hostess execs on their payroll.

VCs win.......pimp
Banks win.........pimp
Execs win.........dirty whores

#40 TakeAStepBack

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Posted 30 November 2012 - 02:14 AM

Well, the employees could buy them out too. It's as if everyone should just lose. And there is absolutely no one way this company failed. Blaming on venture capitalists is extremely short sighted in my view. If profit is the motive, killing the profit machine is a really bad way of doing it.

#41 Tim the Beek

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Posted 30 November 2012 - 02:15 AM

I maybe wrong, but I think you are confusing the "executives" with the "Venture Capitalists". The Executives who are going to benefit from this deal aren't the "bad guys"; they're just being portrayed as such because they're the only people who get to keep a job and will be doing so at a handsome paycheck while tens of thousands of people lose lower paying jobs.

There is no money left; only the physical assets of the company (whether factory or intellectual(recipes etc.), which the VCs put up as collateral to back the debt to banks. The VC investment to prop it all up was the senior debt, the initial working capital,(not debt capital) to keep the business going short term and the VCs get to cash it out because they had the collateral in place. They're doing such to avoid close to a billion dollars in pension liabilities and now to avoid paying a couple mil in salaries to the executives to execute the liquidation.

This is typical vulture VC economics playing games with current bankruptcy law.


I know the difference between a company executive and the VC sharks. But I'm still confused as to where the money's coming from to pay the executives, if it isn't from corporate assets (even if they're assets being sold of to raise cash to pay their salaries).

VC has it's place in the business world, but there should be more penalties for the abuses some of the people in that game play - Bain Capital loading companies up with debt and selling them off comes to mind...

#42 deadheadskier

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Posted 30 November 2012 - 02:50 AM

I know the difference between a company executive and the VC sharks. But I'm still confused as to where the money's coming from to pay the executives, if it isn't from corporate assets (even if they're assets being sold of to raise cash to pay their salaries).

VC has it's place in the business world, but there should be more penalties for the abuses some of the people in that game play - Bain Capital loading companies up with debt and selling them off comes to mind...


exactly what it is.

this deal is all about where the money is coming from to pay the "smart exec's" needed to execute the liquidation.

The VC's don't want to pay them out of their cut in the deal (even though they were the business partners of the execs)

The banks don't want to pay them either (because they were not and don't want to be involved in the business)

so the courts decide that the compensation to the bank comes via asset sales (probably a few riders / additional bonuses in there to the execs if they sell off the assets well)

VCs are off the payroll

Banks get to stay out of it and deduct those bonuses/salaries from their overall debt liabilities.

PBGC comes in to cover the line level Hostess employees; i.e. you and me because that federal corp is underfunded by the corps that pay into it.

VCs win a lot -pimp
Banks win a lot -pimp
Hostess execs win a lot if their pimps can negotiate payment - whore

The employees and taxpayers = the johns

#43 deadheadskier

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Posted 30 November 2012 - 02:51 AM

put that twinkie in your deep fryer and eat it.

:rolling:

#44 TakeAStepBack

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Posted 30 November 2012 - 02:54 AM

Taxpayers?

#45 Tim the Beek

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Posted 30 November 2012 - 03:00 AM

I see what you're saying, Ryan, though I don't know if there's any way around it given the nature of the corporate form...

#46 deadheadskier

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Posted 30 November 2012 - 03:01 AM

Taxpayers?


The PBGC is underfunded. Who do you think picks up the tab?

#47 TakeAStepBack

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Posted 30 November 2012 - 03:05 AM

I didn't realize that it falls on federal/state money to pay the pensions. I assumed they go unclaimed or auctioned in liquidation. But again, the devil is in the details.

#48 TakeAStepBack

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Posted 30 November 2012 - 03:11 AM

http://www.pbgc.gov/...es/pr12-34.html


Statement from PBGC Communications Director J. Jioni Palmer on the Potential Liquidation of Hostess Brands Inc.

November 21, 2012

"We understand that the Bankruptcy Court has approved Hostess' motion for an orderly wind down of its businesses and sale of its assets," said J. Jioni Palmer, Senior Advisor & Director of Communications and Public Affairs. "However, PBGC exists to safeguard retirement security in uncertain times, and that's what we'll do for the 2,300 men and women in Hostess's single-employer plan if the company liquidates. The plan is underfunded by about $55 million.

"Hostess belongs to 42 multiemployer plans, but its liquidation wouldn't cause those plans to immediately become insolvent. PBGC doesn't take responsibility for multiemployer plans, but instead gives financial assistance to the plans that can't pay benefits."

About PBGC

PBGC protects the pension benefits of 44 million Americans in private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans. For more information, visit PBGC.gov.



:facepalm:


#49 deadheadskier

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Posted 30 November 2012 - 03:18 AM

:facepalm: at me or at the info in your quote?

#50 deadheadskier

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Posted 30 November 2012 - 03:22 AM

I see what you're saying, Ryan, though I don't know if there's any way around it given the nature of the corporate form...


Well, if I were the judge, I'd say you're on your own. Figure it out boys. You (The VCs and the Banks) aren't getting a tax break to figure out how to sell off twinkie factories. If you need to employ former Hostess execs to execute the liquidation, that's on your dime; not the taxpayers.

unfortunately, current bankruptcy law would make me a very bad federal judge :lol: