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Old 30th November 2012, 06:55 AM   #241
WildCat
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Originally Posted by Foolmewunz View Post
Okay, now it's your turn. Please quote me the party who said that the company "was driven into bankruptcy just so the CEO could get his raise/bonus/remuneration". No fair just saying that the information is out there. You have to quote it or it just didn't happen.

And it proves my point about this just being a diversion on winning debate points.


Have you read this thread? There was jj:
Originally Posted by jj View Post
They're looting the debtors, they're looting the shareholders, and they're putting 10,000 people or so out of work in order to enrich upper management. Management has also avoided trying to find a buyer, or anything else, is determined to liquidate, and is spoiling to close the whole business as fast as possible.


That seems clear.
Then some other guy:
Originally Posted by Foolmewunz View Post
They are still peddling their old products to keep the brand name alive and planning to auction the brands when they liquidate the company. They care not for the company. They've re-invested nothing in product development - instead writing themselves bonuses with any savings they've squeezed out of the unions. They close down a plant/bakery to save a million and then they go and pay the same or more for their suite of corporate offices in Dallas. Why? They closed down their Texas operations years ago. Ah, but one of their revolving CEOs was a Dallas guy who didn't want to move to Kansas City - where they have nice half-empty offices due to all the back office jobs they've farmed out to the Philippines.

The_Animus claims that driving a company into failure is " easy and profitable":
Originally Posted by The_Animus View Post
Originally Posted by WildCat View Post
Is that what has happened here? That should be the case, remember you have to prove the conspiracy theory that Hostess was taken over for the express purpose of forcing it to fail.

eta: oh, and you also have to prove the claim that causing the company to fail somehow makes it even more profitable than if it had become, errr, profitable.
Why? One way is easy and profitable, the other is hard and has no guarantee of success or greater profitability.
Do you need more examples?
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Old 30th November 2012, 07:07 AM   #242
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Originally Posted by Dr. Keith View Post
Well of course it is ridiculous, isn't that the point of a strawman?

My brief reading of this thread shows many patient posters trying to point out that there are many ways to make money off of a struggling company. The fact that these strategies were discussed at length in recent political debates about Gov. Romney has led a few here to assume that full explanations would be redundant. I tend to agree.

If you buy a struggling company for cheap there are many ways to make money from it. One way is to turn it around. This is the most profitable solution, but it is also very difficult. But, if the company can turn the corner everyone will make lots of money. Sometimes there are obvious ways for doing so that the preceding management were either unwilling or unable to implement. In those few cases the venture capital group can really hit a home run. More often it is simply no longer possible to right the ship. In those case the venture capital group needs to figure out the most profitable exit strategy.

The new owners often hedge against the likely failure with other strategies. One is to get lenders into the game by offering them debt at well below face value with very attractive returns. Throw in a well known brand name and you will certainly get some lenders no matter how bad the books look. That seems to have happened here.

That cash can be used to repay the new owners either directly by reducing the purchase debt or indirectly through consulting fees. The consulting fee structure was popular with Bain, but I have no idea which structure was used here. There are probably other options that I am not aware of, but the exact mechanism is less important. What is clear is that the fresh cash was not used to update facilities or pay down accrued pension debts.

As a worker, union or not, the lack of investment in long term assets or in reducing pension debts is a red flag that the owners and management are not in this for the long haul. Using the cash to reduce the owners exposure rather than increase the likelihood of a turnaround is the proverbial middle finger to any worker. This is not a union issue, it is an employee issue. When the captain stops working on the ship and instead is readying his personal life boat it is time for the crew to do the same. Especially if the ship owner has already off-loaded the cargo and is trying to get you to stay on board at a reduced salary.

So, you're point is partially right: turning the company around is the most profitable end game for the venture capital company. But, the other posters are also right: when a company is not likely to be turned around there are ways to make money off the sinking ship and most of them include treating the worker very badly.

And your strawman is every bit as ridiculous as you claim it to be. Congrats!
Dude, you're still here claiming that somehow driving a company into failure is profitable.

You say they should have invested in new equipment, but unions are notorious for blocking such moves because efficient machines that save money usually do so by cutting the labor tp produce product.. See the US steel industry for an example. And we know there were some crazy union work rules at Hostess plants, such as one product per truck.

Now you claim that the owners somehow suckered lenders into giving them sacks of money, apparently with no conditions whatsoever. Not even dibs on the assets from liquidation.

This doesn't happen in the real world. Those lenders with hundreds of millions to invest didn't get that cash by being suckered by equity firms, they're going to demand first dibs on assets sold when the company fails. The owners don't just get to keep it like in your fantasy wortld.

So now we're back to the claim that this was all a scheme by the owners to give their hired management team raises at an enormous loss for themselves?
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Old 30th November 2012, 07:09 AM   #243
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Originally Posted by The_Animus View Post
None of your response has anything to do with what you are responded to. You said quoting a portion of the article is necessary because sometimes people link bomb (aka posting 20 links) or post links with 200 pages. I said that happens but doesn't seem to be the case in this thread so... Why even bring that up? You then responded with the above.
And yet you still can't show any evidence for your claims, even though you say it's easy to find.

Hmmmm...
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Old 30th November 2012, 07:14 AM   #244
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Originally Posted by Meadmaker View Post
I don't think what he said really requires evidence, because he was simply pointing out a possibility.
There's a possibility that Sasquatch exists too. And that Jesus will return next week.

Originally Posted by Meadmaker View Post
Was management/ownership deliberately running Hostess into the ground? I don't know, but I do know that some of the people who were making the decisions will make a chunk of money out of it.
If you "know" this then you can provide examples, yes? Otherwise it's not something you know, but something you believe. Or is this going back to the claim that the owners drove the company into failure, at an enormous loss, just to give management (who are not the owners) a pay raise?

Originally Posted by Meadmaker View Post
Was that their goal, or their fallback position? I certainly don't have enough information to figure it out.
The lament of every conspiracy theorist ever.
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Old 30th November 2012, 07:19 AM   #245
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Originally Posted by WildCat View Post
Dude, you're still here claiming that somehow driving a company into failure is profitable.

You say they should have invested in new equipment, but unions are notorious for blocking such moves because efficient machines that save money usually do so by cutting the labor tp produce product.. See the US steel industry for an example. And we know there were some crazy union work rules at Hostess plants, such as one product per truck.

Now you claim that the owners somehow suckered lenders into giving them sacks of money, apparently with no conditions whatsoever. Not even dibs on the assets from liquidation.

This doesn't happen in the real world. Those lenders with hundreds of millions to invest didn't get that cash by being suckered by equity firms, they're going to demand first dibs on assets sold when the company fails. The owners don't just get to keep it like in your fantasy wortld.

So now we're back to the claim that this was all a scheme by the owners to give their hired management team raises at an enormous loss for themselves?
No, it was a scheme by the owners to make an enormous profit by turning around an unprofitable business with considerable tangible and intangible assets. Unfortunately this didn't work out for a number of reasons (including misreading the market, interest charges and remaining employment practices) so they've returned to plan 'B' which is to make a modest profit from the firesale.

The current owners of Hostess' debt did not pay face value for it so stand to make a profit even if the asset sale realises much less than the notional value of the debt.

You're right that the executives' pay has not had a significant impact on Hostess' financial woes (after all the total executive pay over the last 8 years has been much less than 10% of the debt) but increasing executive pay many-fold at a time when the company is going down the toilet and the majority of employees are making significant concessions doesn't give the impression that the executives are as committed to the company's success as they should be.

When the employees made the $110 million concessions, they were given the impression that this money would be invested in the future success of the company by investing in plant. Instead the money went to servicing debts (bought at a significant discount by the current business owners) and increased executive pay.
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Old 30th November 2012, 07:23 AM   #246
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Originally Posted by Foolmewunz View Post
No. We didn't say they got away with it, but that the management voted itself a big bonus. That much we have evidence for. Whether or not the owners were behind that, we can't say.
Oddly enough, you seem to have "forgotten" to post this evidence that "management voted itself a big bonus". The owners just give them a blank check and tell management to pay themselves whatever they want? Is this how it works in your company and others you worked for?

Originally Posted by Foolmewunz View Post
And the fact that they withdrew it does not change the fact that they proposed another one a few weeks ago that they're waiting to float in front of the bankruptcy judge. This one is for bonuses and departure packages. This is where the argument started from a few pages back. One side says that it's a bit absurd that they can vote themselves a couple of million in golden parachutes "because that's the market" for this sort of work, yet they need to squeeze 8% (of $16.50 per hour) out of the bakers. The other side says that this is fine because those management members earned it.
And then there's thos elike me who find your entire claim silly, unsupported, and without merit. Feel free to post the evidence of management "voting themselves a couple of million in golden parachutes".

Odd you posted that in response to a post where it was shown that the CEO left because he didn't get the compensation demanded. It's as if you didn't even read it.
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Old 30th November 2012, 07:41 AM   #247
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Originally Posted by The Don View Post
No, it was a scheme by the owners to make an enormous profit by turning around an unprofitable business with considerable tangible and intangible assets. Unfortunately this didn't work out for a number of reasons (including misreading the market, interest charges and remaining employment practices) so they've returned to plan 'B' which is to make a modest profit from the firesale.
A "modest profit"? You've shown no evidence at all for that. Likely they will lose many millions, perhaps hundreds of millions. You do realize that creditors get first dibs on the proceeds from these assets, don't you? And there's what, $1 billion or so owed to creditors not counting the money the owners poured into it?

Originally Posted by The Don View Post
The current owners of Hostess' debt did not pay face value for it
An absolutely meaningless phrase. No one pays face value for debt, it's always discounted.

Originally Posted by The Don View Post
so stand to make a profit even if the asset sale realises much less than the notional value of the debt.
No, they still owe 100% of the value of the debt. That's how it works, and it's unlikely the sale will cover all the debts.

Originally Posted by The Don View Post
You're right that the executives' pay has not had a significant impact on Hostess' financial woes (after all the total executive pay over the last 8 years has been much less than 10% of the debt) but increasing executive pay many-fold at a time when the company is going down the toilet and the majority of employees are making significant concessions doesn't give the impression that the executives are as committed to the company's success as they should be.
Once again, the CEO left. Now they have to hire a new one. They don't come cheap, especially when the task they're asked to accomplish is near impossible.

Originally Posted by The Don View Post
When the employees made the $110 million concessions, they were given the impression that this money would be invested in the future success of the company by investing in plant. Instead the money went to servicing debts (bought at a significant discount by the current business owners) and increased executive pay.
Servicing debt is an investment in the company. If you don't service that debt the company goes bye-bye. And this is money that never even existed in the first place, Hostess was losing boatloads of money. Those concessions don't represent cash in Hostess' account, it means they have to borrow that much less from lenders.
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Old 30th November 2012, 07:46 AM   #248
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Originally Posted by The Don View Post
I don't have specifics for Hostess, but if they're like most corporations, then executive pay is determined by the board of directors.
While you can make a case that there's a much too cozy relationship between corporate boards and CEOs in public companies, Hostess was a private company.
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Old 30th November 2012, 08:01 AM   #249
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Originally Posted by WildCat View Post
While you can make a case that there's a much too cozy relationship between corporate boards and CEOs in public companies, Hostess was a private company.
They still have a Board of Directors and unless they are run in a very different way to other private companies then the Board of Directors are responsible for setting the pay for the directors on the board.

btw, the CEO is usually a member of the Board of Directors.
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Old 30th November 2012, 08:18 AM   #250
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Originally Posted by WildCat View Post
A "modest profit"? You've shown no evidence at all for that. Likely they will lose many millions, perhaps hundreds of millions. You do realize that creditors get first dibs on the proceeds from these assets, don't you? And there's what, $1 billion or so owed to creditors not counting the money the owners poured into it?
The money the owners poured in forms part of the debt.

Originally Posted by WildCat View Post
An absolutely meaningless phrase. No one pays face value for debt, it's always discounted.
One of the questions you've asked time and again is "how do you make money out of a company going under ?"

One way to do it is to buy debt at a fraction of its face value, be paid interest on the full value of the debt and then get more out of the fire sale than you paid for the debt in the first place.

Originally Posted by WildCat View Post
No, they still owe 100% of the value of the debt. That's how it works, and it's unlikely the sale will cover all the debts.
If I buy $10 of debt for $5 then the company is still in debt to the value of $10 but I'll still make a profit if I get 50% of the debt paid back.

The sale will almost certainly not cover all of the debts but there's a reasonable chance that it'll be enough to cover the amount that was paid for the debt.

Originally Posted by WildCat View Post
Once again, the CEO left. Now they have to hire a new one. They don't come cheap, especially when the task they're asked to accomplish is near impossible.
Well that's what the CEO will have you believe

It also doesn't account for the pay of the other executives.

Originally Posted by WildCat View Post
Servicing debt is an investment in the company. If you don't service that debt the company goes bye-bye. And this is money that never even existed in the first place, Hostess was losing boatloads of money. Those concessions don't represent cash in Hostess' account, it means they have to borrow that much less from lenders.
Servicing a debt is most certainly not an investment in the company, it's just part of current spending. This is why people are so cross at the size of national debts, they see money being spent servicing the debt and not being invested in the country.

In Hostess' case, a significant proportion of the debt was made up of money that the investors were supposed to be investing in the company.

The process seems to have worked like this:

I borrow $5 to buy $10 of a company's debt.

I transfer the $5 to the company's debt which is now £15

Every year I get the interest on the $10 of debt I own, the bank gets the interest on $5. I can never be out of pocket even if the company defaults on all loans.
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Old 30th November 2012, 09:34 AM   #251
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Originally Posted by WildCat View Post
Dude, you're still here claiming that somehow driving a company into failure is profitable.
No, I'm still here pointing out that others have clearly shown you what the news has been repeating about Bain and other VCs over the last two years: that there is money to be made even when a company fails. And, sometimes that is the easiest money to be made.

Turning a faltering company around is not exactly easy or we would all be doing it. So, buyers hedge their bets in case they are not successful at the turn around. Does that simple proposition really surprise you?

Quote:
You say they should have invested in new equipment, but unions are notorious for blocking such moves because efficient machines that save money usually do so by cutting the labor tp produce product.. See the US steel industry for an example. And we know there were some crazy union work rules at Hostess plants, such as one product per truck.
OK, let's ignore the equipment since neither of us have enough facts to argue the finer points of that one. Let's focus on a more clear indication that management was giving up: show me how the unions prevented the company from paying their pension obligations.

Quote:
Now you claim that the owners somehow suckered lenders into giving them sacks of money, apparently with no conditions whatsoever. Not even dibs on the assets from liquidation.
Wow, where did I claim all of that? That's sort of a lot of stuff that I never actually said.

The lenders may very well have some securitization, but I know the VC has either cash or priority on the securitization. This ha been discussed elsewhere.

Quote:
This doesn't happen in the real world.
Strawmen rarely do. See a pattern?

Quote:
Those lenders with hundreds of millions to invest didn't get that cash by being suckered by equity firms, they're going to demand first dibs on assets sold when the company fails. The owners don't just get to keep it like in your fantasy wortld.
They may well have first dibs, but understand that the VC already has their cash. BTW, lenders make money by taking calculated risks and then selling off as much of the risk as possible while maintaining as much of the reward as possible. The fact that they sometimes end up holding the bag is more than made up byt the times they get paid well.

Ask a five star restaurant owner how awful it is when a case of wine is dropped off the loading dock. It sucks, but they don't stop selling wine. And this is more like dropping a case and having one or two bottles break. They'll still make money, but less than they wanted to.

Quote:
So now we're back to the claim that this was all a scheme by the owners to give their hired management team raises at an enormous loss for themselves?
Vegetarian? You sure do love some straw . . .

It is about the owners realizing that the big payoff of a turnaround isn't going to happen so they start finding every conceivable way to make a profit before the boat sinks. The longer the boat floats the more they can get off of it, but once the crew noticed the plundering they said "no thanks" and left. Why is this such a hard concept to understand?
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Old 30th November 2012, 11:04 AM   #252
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I've been looking for details about the financial effects of this bankruptcy on the owners of the company and I didn't find any but FWIW, I did find something that surprised me.

I had assumed that once the bankruptcy moved to shut down mode, it would automatically be converted to a chapter 7 bankruptcy. This isn't the case. The judge has left the owners of the company in charge, albeit their actions need to be approved by him.

This might hold open the possibility that the owners could recover some money from the proceeds of the sales if they generated enough money to pay all the secured and unsecured creditors. This seems unlikely but I imagine that if there was enough money generated to pay the secured creditors that the employees would have priority over the owners for things like penalties for layoff without notice and borrowed pension funds. And the state might be able to get some reimbursement for unemployment benefits paid out as a result of the closure.
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Old 30th November 2012, 11:10 AM   #253
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Originally Posted by Dr. Keith View Post
...

It is about the owners realizing that the big payoff of a turnaround isn't going to happen so they start finding every conceivable way to make a profit before the boat sinks. The longer the boat floats the more they can get off of it, but once the crew noticed the plundering they said "no thanks" and left. Why is this such a hard concept to understand?
It's not a hard concept to understand. Could you provide evidence that the owners were plundering the company?
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Old 1st December 2012, 02:53 AM   #254
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Oh, those poor owners....

http://finance.yahoo.com/news/hostes...171645949.html

Only 100+ buyers lining up and starting to put forth offers for the popular brands. They'll just never make back their money, poor babies.

Interesting that they can't afford to put in 1.1 million a month that they stopped paying into the pension fund, but they can make sure to pay those managers a fat bonus so that they'll stay on and manage the liquidation. I dunno, but in most liquidations I've seen, you bring in specialists who know how to do that sort of thing. Oh, wait... maybe that's why they've been there for the past year? They are liquidation specialists - that's why they're there.

And this is just a discussion of taking over the brand names. If one of those buyers wants to buy the facilities and/or land, that'll be more.

I said it in my last post. Let's wait until all is said and done. I say that we'll see some nice black ink at the bottom of the ledgers of both the creditors and the owners.
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Old 1st December 2012, 07:35 AM   #255
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Don't know if this has posted here yet, but the bankruptcy court slapped the workers in the face and approved more looting by the execs:

http://www.addictinginfo.org/2012/11...ss-executives/
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Old 1st December 2012, 08:49 AM   #256
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Originally Posted by Muldur View Post
Don't know if this has posted here yet, but the bankruptcy court slapped the workers in the face and approved more looting by the execs:

http://www.addictinginfo.org/2012/11...ss-executives/

Good!
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Old 1st December 2012, 09:09 AM   #257
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Originally Posted by Muldur View Post
Don't know if this has posted here yet, but the bankruptcy court slapped the workers in the face and approved more looting by the execs:

http://www.addictinginfo.org/2012/11...ss-executives/
Those executives are being asked to give up other job opportunities in return for managing the orderly shut down and sale of Hostess. If the judge approved these salaries against the interest of the creditors (and probably the union members are amongst the creditors) then presumably they would be objecting. Are they?
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Old 1st December 2012, 10:05 AM   #258
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Originally Posted by davefoc View Post
Those executives are being asked to give up other job opportunities in return for managing the orderly shut down and sale of Hostess. If the judge approved these salaries against the interest of the creditors (and probably the union members are amongst the creditors) then presumably they would be objecting. Are they?
Yes. Read the link I provided right above the post you replied to. The Bakers have asked the court to put someone else in charge.
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Old 1st December 2012, 10:15 AM   #259
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Originally Posted by Muldur View Post
Don't know if this has posted here yet, but the bankruptcy court slapped the workers in the face and approved more looting by the execs:

http://www.addictinginfo.org/2012/11...ss-executives/

Quote:
These plans include paying 19 executives $1.8 million in bonuses — and two of these higher-ups additional incentives — for meeting specified goals during the liquidation process, which will take up to a year.
19 executives dividing $1.8 million over a year hardly sounds like "looting". Plus which, note my bolding. These are incentives; if the goals are not met, the money is not paid.
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Old 1st December 2012, 10:56 AM   #260
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This is a pretty good overview of who owns Hostess right now and how they came to own their stake: http://management.fortune.cnn.com/ta...wood-holdings/ Ripplewood Holdings is a private equity firm that has the largest equity share of the company right now. This is what the article has to say about their situation:

Quote:
...Ripplewood is pretty much out of the picture by now, except to the extent it can eventually persuade the bankruptcy judge to toss it a bone. While Ripplewood retains some debt, its equity is so far under water that it might as well be gone....
How Ripplewood came to be involved was interesting:
Quote:
Ripplewood's foray into Hostess was partly enabled by Collins's connections in the Democratic Party. He wanted to explore deals with union-involved companies and sought the help of former congressman Gephardt, who in 2005 founded the Gephardt Group, an Atlanta consulting firm that provides "labor advisory services." In his 2004 presidential bid, Gephardt -- whose father was a Teamsters milk truck driver -- was endorsed by 21 of the largest U.S. labor unions; in 2003, Collins was one of 19 "founding members" of Gephardt's New York State leadership committee.
So all this alleged plundering of the company has been going on by a company run by a Democrat that contracts for guidance from a company owned by Dick Gephart, in the past a major Democratic Party political figure.

And how have these plunderers of Hostess gone about it? Well Ripplewood put up $130 million dollars to get a majority share of control of the company which at this point seems to have been completely wiped out. The lenders wrote down $225 million dollars in debt and they put up another $360 million dollars in cash. All to end up with this situation:

Quote:
Overall, Hostess lost $341 million in fiscal 2011, 2½ times the loss of the prior year -- and by early 2012, primarily because of burgeoning interest obligations, its debt had grown to about $860 million.
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Old 1st December 2012, 11:02 AM   #261
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Originally Posted by jhunter1163 View Post
19 executives dividing $1.8 million over a year hardly sounds like "looting". Plus which, note my bolding. These are incentives; if the goals are not met, the money is not paid.
Well, that's going to depend on where you sit, isn't it? Let's say you're one of the creditors and the company has simply announced that it cannot afford to pay you (or any of their bills) the current payment due of 1.1 million dollars. Do you not wonder how they found 1.8 million to give to these executives yet just stiffed you for the 1.1 million payment?

And yes, I know that it's within the law, and I know that the judge has commented that this is normal, or actually a little lower than the scale he's seen in similar dissolution actions. I'm just wondering how everyone here favoring these remuneration packages would view it if it was their money being defaulted on.
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Old 1st December 2012, 11:14 AM   #262
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Originally Posted by davefoc View Post
This is a pretty good overview of who owns Hostess right now and how they came to own their stake: http://management.fortune.cnn.com/ta...wood-holdings/ Ripplewood Holdings is a private equity firm that has the largest equity share of the company right now. This is what the article has to say about their situation:



How Ripplewood came to be involved was interesting:


So all this alleged plundering of the company has been going on by a company run by a Democrat that contracts for guidance from a company owned by Dick Gephart, in the past a major Democratic Party political figure.

And how have these plunderers of Hostess gone about it? Well Ripplewood put up $130 million dollars to get a majority share of control of the company which at this point seems to have been completely wiped out. The lenders wrote down $225 million dollars in debt and they put up another $360 million dollars in cash. All to end up with this situation:
Uh, Dave.... A couple of points:

That information has been available since I posted the link to the old Fortune article several pages ago.

I also haven't seen a lot of people arguing that this is Evil Republicans and that Obama would've done something. Obviously, he hasn't. This is in the Economics sub-forum and is not a discussion of politics.

And, by the way, don't assume Ripplewood's going to get burned. As I've said a few times, let's wait and see what the assets sell for. Hostess Brands (the big stuff like Wonderbread and Twinkies) has sales of over 3 billion a year. Even if that's down from what they needed to make it work at HB, that's still a lot of product sales. The products may not have been profitable coming out of bakeries of a company that has across-the-board downward motion of its sales and market shares, but bakeries and bakery product companies producing a mix of products may be able to use their own production and distribution efficiency to make a nice profit on the sideline of producing Twinkies.

We will know the full story after they've liquidated the assets and auctioned off the brands. Until then, we're arguing about how it seems to our untrained eyes. I wouldn't put much store in Ripplewood having written down their investment. That could be for various reasons. It does not say that they are not in line as one of the major secured creditors. I believe that they clearly are and if the income from the liquidation provides enough to pay off the company debt, then they'll get all their money back, plus their various fees.

I'll again include my disclaimer that most everything I post in this thread is based on my own opinions. The dust is far from settled on this.
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Old 1st December 2012, 11:14 AM   #263
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Originally Posted by Foolmewunz View Post
Well, that's going to depend on where you sit, isn't it? Let's say you're one of the creditors and the company has simply announced that it cannot afford to pay you (or any of their bills) the current payment due of 1.1 million dollars. Do you not wonder how they found 1.8 million to give to these executives yet just stiffed you for the 1.1 million payment?

And yes, I know that it's within the law, and I know that the judge has commented that this is normal, or actually a little lower than the scale he's seen in similar dissolution actions. I'm just wondering how everyone here favoring these remuneration packages would view it if it was their money being defaulted on.
I'd probably be OK with it. If the slightest hint of self dealing showed up I'd be pretty unhappy, but at this point I'd just be happy to recover as much as I could of my initial investment and these executive salaries are a tiny fraction of the overall secured debt of the company and they are an even smaller percentage of the total secured and unsecured debt. My guess is that the major secured creditors must be OK with the deals made with these executives or they could just take control of the company and put their own guys in place. The fact is that nobody wants the company as it is currently configured and all that is left is trying to retrieve some of the money that has been invested in the company back. Presumably, these guys were hired for their ability to maximize the revenue from the sale of assets and griping about their salaries is all that is left for people looking to vilify anybody except the unions for the demise of this company.
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Old 1st December 2012, 11:22 AM   #264
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Originally Posted by davefoc View Post
I'd probably be OK with it. If the slightest hint of self dealing showed up I'd be pretty unhappy, but at this point I'd just be happy to recover as much as I could of my initial investment and these executive salaries are a tiny fraction of the overall secured debt of the company and they are an even smaller percentage of the total secured and unsecured debt. My guess is that the major secured creditors must be OK with the deals made with these executives or they could just take control of the company and put their own guys in place. The fact is that nobody wants the company as it is currently configured and all that is left is trying to retrieve some of the money that has been invested in the company back. Presumably, these guys were hired for their ability to maximize the revenue from the sale of assets and griping about their salaries is all that is left for people looking to vilify anybody except the unions for the demise of this company.
Well, but I see people (I referred to them as Pavlovian a number of times) exclusively vilifying the unions as being the reason for the failure. There might even be a hint in the thread title.

As I mentioned in the post when I originally linked to the Fortune Magazine article, there's enough blame all around on this. They all contributed. I'm not arguing that management was solely to blame nor am I willing to accept that the unions are just a bunch of greedy parasites. I am arguing, as someone who spent four decades in middle management, that there's considerably more mismanagement here than union greed. PE has this problem in that it's, by definition, "private". A publicly traded company would've had considerably more visibility and would make a lot of our posts here superfluous.
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Old 1st December 2012, 11:23 AM   #265
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Originally Posted by Foolmewunz View Post
Well, that's going to depend on where you sit, isn't it? Let's say you're one of the creditors and the company has simply announced that it cannot afford to pay you (or any of their bills) the current payment due of 1.1 million dollars. Do you not wonder how they found 1.8 million to give to these executives yet just stiffed you for the 1.1 million payment?

And yes, I know that it's within the law, and I know that the judge has commented that this is normal, or actually a little lower than the scale he's seen in similar dissolution actions. I'm just wondering how everyone here favoring these remuneration packages would view it if it was their money being defaulted on.
That $1.1 million payment is per month; the $1.8 million is over a year ($150,000 a month, possibly more if the wind-down is accomplished faster). And the $1.8 million is conditional; it's possible that not all of it will be paid. They're not just cutting checks to these executives tomorrow.

As I've said in other posts, the management of Hostess is surely not without blame in this situation; but it is disingenuous to focus on this comparatively small issue and not look at the much larger issues of debt load, declining sales, antiquated work rules, etc. which combined to drive the stake into the heart of this American icon.
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Old 1st December 2012, 12:14 PM   #266
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Originally Posted by Foolmewunz View Post
Uh, Dave.... A couple of points:

That information has been available since I posted the link to the old Fortune article several pages ago.
Sorry.
Quote:

I also haven't seen a lot of people arguing that this is Evil Republicans and that Obama would've done something. Obviously, he hasn't. This is in the Economics sub-forum and is not a discussion of politics.
I am mostly non-partisan and I didn't mention the Democratic Party as a political dig. However, I believe that over the long haul, forcing benefits significantly above market level has serious unintended consequences that will eventually cause the failure of a company or industry unless the government intervenes and provides a bailout as it did for the auto industry.

The theory that I am wrong about that is one of the Democratic Party's core beliefs. The idea, I guess, is that that raising benefits above market levels just increases benefits to workers at the expense of reduced profits by the owners. I made note of the fact that prominent Democrats were involved in the purchase and bankruptcy of Hostess because the result here at least provides an example of a case where the Democratic Party's support of government enforced coercion by unions produced a result consistent with what I would have expected and at odds with the Democratic Party's ideology associated with unions.

Quote:
And, by the way, don't assume Ripplewood's going to get burned. As I've said a few times, let's wait and see what the assets sell for. Hostess Brands (the big stuff like Wonderbread and Twinkies) has sales of over 3 billion a year. Even if that's down from what they needed to make it work at HB, that's still a lot of product sales. The products may not have been profitable coming out of bakeries of a company that has across-the-board downward motion of its sales and market shares, but bakeries and bakery product companies producing a mix of products may be able to use their own production and distribution efficiency to make a nice profit on the sideline of producing Twinkies.
For all I know Ripplewood might make a profit, but it looks right now like that is unlikely. Even if the funds become available to reimburse the secured creditors there looks to be years of wrangling ahead by the unsecured creditors. Looking at the situation right now I suspect that Ripplewood couldn't sell their equity position for even 1 % of their investment. Would you like to be part of a consortium to buy them out? And if they do make a profit, is that bad? They put a lot of money at risk and if stuff works for them why wouldn't they deserve a profit.

Quote:

We will know the full story after they've liquidated the assets and auctioned off the brands. Until then, we're arguing about how it seems to our untrained eyes. I wouldn't put much store in Ripplewood having written down their investment. That could be for various reasons. It does not say that they are not in line as one of the major secured creditors. I believe that they clearly are and if the income from the liquidation provides enough to pay off the company debt, then they'll get all their money back, plus their various fees.

...
This makes your position about the same as Wildcat's. We don't know if the company was looted but there is no evidence that they have done anything illegal or unethical right now. We don't know how the company's owners will make out in the bankruptcy. We don't know how much unsecured debt there is before what is left if anything from the sale will be available to the owners. All we have right now is speculation about possible corruption that has not been supported with any evidence except that the owners of some other companies have taken advantage of a bankruptcy to corruptly obtain corporate assets that rightly belonged to creditors.
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Old 1st December 2012, 02:01 PM   #267
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Originally Posted by davefoc View Post

The theory that I am wrong about that is one of the Democratic Party's core beliefs. The idea, I guess, is that that raising benefits above market levels just increases benefits to workers at the expense of reduced profits by the owners.
Owners, consumers and non-insider labor share the costs.
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Old 1st December 2012, 05:50 PM   #268
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It appears to me that the strike was the straw that broke the camel's back. That camel seems to have already had a load of debt and cost of doing business before that strike was called. Hostess Brands seem to have run into a cash crunch in operations that their most recent investors rewarded by tossing good money after bad. *shakes head* Beyond that, I'll be happy to never eat another twinkie any time soon, since I have stopped eating crap like that years ago.

As it goes for this thread, I find the OP title to be misleading.

Beyond that, have enjoyed reading this discussion, mostly, as it differs a bit from some of the other coverage of this story I have read.
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Old 1st December 2012, 10:03 PM   #269
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Originally Posted by Muldur View Post
Oh good, another completely unbiased website:

"Addicting Info started as a resource to discredit all the lies and propaganda that the right-wing spreads. When I undertook the project I thought I would probably have about 100 different articles about a number of different myths, and people could sort through them at will. Eventually that expanded to news and other info, and I quickly realized the DAUNTING task of actually trying to discredit EVERY right-wing myth that is in existence, especially with the constant creation of new ones."
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Old 2nd December 2012, 12:11 AM   #270
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Originally Posted by Scopedog View Post
Oh good, another completely unbiased website:

"Addicting Info started as a resource to discredit all the lies and propaganda that the right-wing spreads. When I undertook the project I thought I would probably have about 100 different articles about a number of different myths, and people could sort through them at will. Eventually that expanded to news and other info, and I quickly realized the DAUNTING task of actually trying to discredit EVERY right-wing myth that is in existence, especially with the constant creation of new ones."
Know your posters. I'm afraid Muldur couldn't convince his Google to direct him to unbiased news sites if he offered it virtual hookers and virtual blow.

Unfortunately, his post appears right after mine, which had a fairly valid story (much the same as the one he linked to - minus all the "Eat The Rich!" rhetoric).
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