BANKRUPTCY WEEK AHEAD: Hostess To Spar For Chapter 11 Control

Date : 04/13/2012 @ 11:47AM
Source : Dow Jones News
Stock : JP Morgan Chase & Co. (JPM)
Quote : 114.88  0.35 (0.31%) @ 3:31PM
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BANKRUPTCY WEEK AHEAD: Hostess To Spar For Chapter 11 Control

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   By Jacqueline Palank 

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.

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