By Jacqueline Palank
Of DOW JONES DAILY BANKRUPTCY REVIEW
Hostess Brands Inc. on Tuesday will ask a judge to let it keep a
tight grip on its Chapter 11 restructuring as the maker of Twinkies
and Wonder Bread prepares for a faceoff with its unions.
A long agenda for Tuesday's hearing in the White Plains, N.Y.,
bankruptcy court not only includes Hostess's request for an
extension of its exclusive restructuring plan-filing rights but
also the start of a trial on its bid to terminate its existing
union agreements. The trial's start date has already been delayed
several times.
Hostess has said it should be protected from the threat of rival
restructuring plans for an extra three months so it can implement a
turnaround strategy that hinges on major cuts to union benefits and
pensions and could involve new investors.
Failure to achieve those cuts in ongoing negotiations is why
Hostess is moving to terminate the collective-bargaining agreements
that govern the employment terms of its thousands of union
workers.
Current negotiations "are in crisis," the Teamsters union
recently told the bankruptcy court, and Hostess's restructuring
"may well be heading for disaster."
The union, which represents nearly 40% of Hostess's employees,
is asking the judge to wrest control of the company's restructuring
by terminating its exclusive plan-filing rights. It is a call in
which the union is joined by the committee representing Hostess's
unsecured creditors and the pension fund tied to Hostess's
second-largest union.
Eastman Kodak Co. (EKDKQ) on Monday will ask a bankruptcy judge
to let it launch a competitive-bidding process to sell the lease to
its giant billboard in Manhattan's Times Square.
Kodak, which is phasing out its digital-camera business, said it
no longer needs to advertise those products on a 40-foot video
screen that millions of people view each year.
The company has a leading bid of $3.7 million lined up for the
lease from Orange Barrel Media, an advertising firm that already
has two LED billboards in Times Square. Under Kodak's proposal,
Orange Barrel would receive a $200,000 breakup fee if its bid
loses.
Also on Monday, the judge will consider approving a committee to
represent the interests of Kodak's retirees as the company gears up
to slash a heavy load of debts related to retiree health and
pension benefits.
Last month, a group of retirees requested a committee to level
the playing field as they potentially face off with Kodak. The
retirees would get a louder voice in the case through a committee,
whose legal fees would covered by Kodak.
Kodak later filed its own motion in favor of a retiree
committee, a group it hopes will help it reach an agreement on
benefit cuts as soon as possible.
On Monday, Alabama's struggling Jefferson County will ask to
protect its former investment bank, and thereby protect itself,
from pending litigation that could result in a $770 million
judgment.
While Jefferson County's Chapter 9 bankruptcy gives it breathing
room from lawsuits, the county is asking for that protection to be
extended to J.P. Morgan Chase & Co. (JPM), which put together
the county's bond deals worth more than $3 billion that it used to
pay for its sewer system upgrades. Two bond insurers are suing J.P.
Morgan over the fees it paid in connection with the bond deals,
which became the target of a federal corruption probe and sent
several county officials to prison.
An agreement with the county allows J.P. Morgan to pass on any
legal judgments in that suit to Jefferson County, meaning an
adverse judgment against the investment bank is an adverse judgment
against the county. This is why the county said the lawsuit must be
stayed against J.P. Morgan.
"The county's general fund cannot bear the consequences of a
$770 million fraud judgment," county attorneys said in court
papers.
(This item appears in the Dow Jones Daily Bankruptcy Review
newsletter.)
-By Jacqueline Palank, Dow Jones Daily Bankruptcy Review;
202-862-6615
--Rachel Feintzeig and Katy Stech contributed to this
article.