in re hostess brands
TRANSCRIPT
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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------In re
Hostess Brands, Inc., et al.,1
Debtors.
---------------------------------------------------------------
x::
:::::x
Chapter 11
Case No. 12-_____ (___)
(Jointly Administered)
MOTION OF THE
DEBTORS PURSUANT TO
11 U.S.C. 105(A) AND 363(B)
TO EMPLOY AND RETAIN FTI CONSULTING, INC.
TO PROVIDE THE DEBTORS AN INTERIM TREASURER ANDADDITIONAL PERSONNELNUNC PRO TUNCTO THE PETITION DATE
TO THE HONORABLEUNITED STATES BANKRUPTCY JUDGE:
Hostess Brands, Inc. and its five domestic direct and indirect subsidiaries, as
debtors and debtors in possession (collectively, "Hostess" or the "Debtors"), hereby move the
Court for the entry of an order pursuant to sections 105(a) and 363(b) of title 11 of the United
States Code (the "Bankruptcy Code") (i) authorizing the Debtors, pursuant to the terms and
conditions of that certain agreement between FTI Consulting, Inc. and the Debtors dated January
4, 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
1 The 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).
2 A copy of the Engagement Letter is attached hereto as Exhibit A.
3 Nunc 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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support 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 motion
filed on the Petition Date, the Debtors have requested that their chapter 11 cases be consolidated
for procedural purposes only and administered jointly.
2. The Debtors are authorized to continue to operate their business and
manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the
Bankruptcy Code.
3. Hostess Brands, Inc. is a Delaware corporation. Hostess Brands, Inc. is
the direct or indirect parent of the other Debtors, each of which is wholly-owned by Hostess
Brands, Inc. or one of its Debtor subsidiaries. The Debtors maintain their corporate headquarters
in 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 and
distributors 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, Dolly
Madison, 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 competition
and related pricing pressures, thin operating margins and competitors with more sophisticated
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technology 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 market
reach and consolidating operations through acquisitions and other means, thus widening their
cost advantages. Importantly, the Debtors' competitors employ work forces that are not
unionized 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 not
share. Whether the Debtors can achieve long-term viability depends directly and substantially on
the Debtors' ability to achieve dramatic change to their labor agreements, with a corresponding
material reduction in their cost structure and legacy pension and medical obligations, and a
restructuring of their capital structure. That is the purpose and the focus of these chapter 11
cases.
6.
The Debtors' production and distribution systems are heavily dependent on
labor-intensive processes involving, among other things, complicated and extensive local route
delivery systems that service nearly all of the continental United States and a national footprint
of 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 bargaining
agreements. The Debtors' unionized employees belong to 12 separate unions, but the
overwhelming majority of the Debtors' unionized workforce are members of either the
International Brotherhood of Teamsters (the "IBT") or the Bakery, Confectionery, Tobacco
Workers & Grain Millers International Union (the "BCT").
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7. Because their workforce is heavily unionized, the Debtors also participate
in 40 multiemployer pension plans, which, by law, exist only where one or more employers each
contribute to a pension plan pursuant to one or more collectively-bargained agreements. The
Debtors' cash contribution obligations to these plans go beyond amounts attributable to the
retirement benefits for the Debtors' own workforce; they also encompass the contributions
attributable to the retirement benefits of the workforces of other employers who have ceased to
exist or have otherwise withdrawn from the plans. By statute, the plans are structured to place
the financial burdens of all of a plan's retirees upon those remaining companies that have active
union employees. Over the last several decades, the number of companies and the active
employee base supporting these pension plans have shrunk significantly, thus increasing the
burden on the companies, such as Hostess, that remain.
8. The Debtors' management team, which as currently comprised has only
been in place for slightly more than a year, has taken a fresh look at, and has spent considerable
time and energy analyzing, the Debtors' operations and cost structure. As a result of that review,
management has developed a business plan that it believes will allow the Debtors to regain long-
term viability. The business plan is premised upon achieving a competitive cost structure,
including relief from uncompetitive pension and medical benefit legacy costs, re-emphasizing
and funding the marketing of the Debtors' brands, streamlining and modernizing the distribution
of product and obtaining relief from other restrictive work rules that limit the Debtors' flexibility
and competitiveness.
9. In particular, the Debtors believe that their successful reorganization must
encompass systemic, dramatic change, including:
a. withdrawing completely from multiemployer pension plans to achieverelief from the crippling costs of these plans that are, in large part, a result
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of the required funding of retirees whose former employers no longercontribute to the plans;
b. addressing the Debtors' legacy health and welfare costs to achieve asubstantial reduction in the cost of providing benefits to bring such costsin line with current competitive market costs;
c. modifying the Debtors' existing collective bargaining agreements to relaxwork rules and obtain other relief necessary to both bring the Debtors'labor costs in line with that of their competitors and provide the operatingflexibility necessary to respond to changing customer requirements fordelivery and service;
d. securing new capital investment to modernize and automate the Debtors'production and distribution operations; and
e. restructuring the Debtors' capital structure to significantly reduce debt and
related expense.
10. This company has been down this road before. Hostess (then known as
Interstate Bakeries Corporation ("IBC")) sought bankruptcy relief in 2004 (the "IBC
Bankruptcy"). The complex and sometimes highly contentious IBC Bankruptcy lasted more than
four and a half years and achieved only limited, incremental change to the company's cost
structure leaving the multiemployer pension benefits and costs untouched, while allowing the
company to emerge as a highly levered entity. As a result, the Debtors currently have four
separate tranches of long-term secured debt, under which they have aggregate outstanding
liabilities of approximately $860 million. The Debtors exited from the IBC Bankruptcy on
February 3, 2009 as a privately-held company, whose largest equityholders are IBC Investors I,
LLC, IBC Investors II, LLC and IBC Investors III, LLC (collectively, the "Sponsor Funds") and
a subset of their then existing lenders.4
4 The current stockholders of Hostess include, in addition to the Sponsor Funds: Craig D. Jung, SPCP Group, LLC, Monarch DebtRecovery Master Fund Ltd, Monarch Opportunities Master Fund Ltd, Monarch Income Master Fund Ltd, McDonnell Loan
Opportunity Ltd., Arrow Distressed Securities Fund, Schultze Apex Master Fund, Ltd., Schultze Master Fund, Ltd., Gephardt GroupLabor Advisory Services, Mars & Co. Consulting, LLC and Brian Driscoll.
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11. Adjusting for one-off receipts, such as tax refunds and the proceeds from
asset sales, the Debtors have consumed approaching $250 million in cash since exiting the IBC
Bankruptcy in 2009.
12. Accordingly, after developing their business plan, the Debtors initiated
negotiations with their lenders and unions to effect the transformational changes required for
their business. At the same time, the Debtors required additional liquidity to allow these
discussions and negotiations to occur. Accordingly, the Debtors began active discussions with
their lenders regarding additional financing. As a result of those discussions, in March 2011,
Hostess issued $30 million of 10% Secured Convertible PIK-Election Series C Notes, due 2019
which were purchased by two of the Sponsor Funds. Additionally, in June 2011, two of the
Sponsor Funds invested an additional $10 million in the form of equity. Finally, in late August,
the Debtors were able to obtain an additional $20 million of financing from certain of their first
lien term lenders. The purpose of these additional financings was to permit the Debtors time to
negotiate with the unions outside of a chapter 11 filing.
13.
After allowing the IBT and BCT to commence extensive due diligence in
July and August of 2011 (which diligence continued thereafter), the Debtors initiated discussions
with the IBT and the BCT in September and provided both unions with proposals for
modification of their respective collective bargaining agreements. The Debtors provided the IBT
and the BCT with access to a data room containing over 625 documents to enable them to
evaluate the proposals. Additionally, the Debtors responded to over160 diligence requests from
the professionals representing the IBT and the BCT.
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14. After months of bargaining, the Debtors were unable to reach agreement
with their unions regarding pensions, health and welfare benefits and work rule changes before
insufficient liquidity necessitated this filing.
15. Accordingly, the Debtors have filed these chapter 11 cases to conserve
their remaining cash and access the additional debtor-in-possession funding required to continue
to operate while seeking to finalize negotiations regarding the terms of their labor agreements
and capital structure.
16. Additional information regarding the background of the Debtors, the need
for the filing of these cases and the goals for the Debtors within chapter 11 are set forth in the
Affidavit ofBrian J. Driscoll, which is filed contemporaneously herewith.
Jurisdiction
17. This Court has subject matter jurisdiction to consider this matter pursuant
to 28 U.S.C. 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper
before this Court pursuant to 28 U.S.C. 1408 and 1409.
The FTI Consulting Engagement
18. On or about June 10, 2011, the Debtors appointed Mr. David Rush
Interim Treasurer, as set forth in the Engagement Letter. The Engagement Letter further states
that FTI will provide FTI employees to serve as temporary employees of the Debtors necessary
to support the treasury activities ("Additional Treasury Personnel") and other business
("Additional Financial Personnel") of the Debtors (collectively, "Additional Personnel," and
together with the Interim Treasurer, the "Retention Personnel") as set forth more fully herein and
in the Engagement Letter.
19. The Debtors are familiar with the professional standing and reputation of
FTI and Mr. Rush, as well as the other Additional Personnel, who the Debtors understand and
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recognize have a wealth of experience in providing consulting services in restructurings and
reorganizations and enjoy an excellent national reputation for turnaround services they have
rendered in bankruptcy cases on behalf of debtors and creditors throughout the United States.
The Debtors have been advised by FTI that it will endeavor to coordinate with the other
professionals retained in these bankruptcy cases to eliminate unnecessary duplication or overlap
of work.
Terms of Engagement
20. Pursuant to the terms of the Engagement Letter,5 the Retention
Personnel's activities would include, but not be limited to:
Interim Treasury Management Function
a. Provide comprehensive treasury services and coordinate and directCompany employees as necessary. David Rush, Senior ManagingDirector, will serve in the capacity of Interim Treasurer for a fixedmonthly fee as described below;
b. Work with management and employees to refine the Company's existingcash flow forecasts, related analyses and reporting. Provide anyrecommendations to existing practices and methodologies; and
c. Provide additional FTI professionals to serve as Additional TreasuryPersonnel of the Company and provide support as required.
Provide FTI professionals to serve as Additional Financial Personnel of the
Company to provide services as follows and as may be requested by theCompany from time to time:
d. Assist with the Company's execution of planned liquidity enhancementinitiatives, including working capital management and cost savingsprograms;
e. Develop the Company's integrated multi-year financial projection model by brand, business unit and region through coordination and discussionwith management and Company employees;
5 Capitalized terms used but not defined herein are ascribed the meanings given such terms in theEngagement Letter.
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f. Perform a detailed assessment of the Company's operations, identify performance improvement opportunities and assist management andCompany employees in implementing and executing the identifiedinitiatives;
g. Prepare other financial analysis and reporting as needed to assistmanagement in negotiations and discussions with the Company'sstakeholders;
h. Participate in meetings and negotiations/interface with stakeholders and/ortheir advisors as necessary.
i. Prepare a comprehensive winddown plan and related liquidation analysiswith supporting schedules, and assist the Company in implementation ofsuch plan, as necessary;
j. Develop with management detailed contingency planning related to
potential liquidity shortfalls or planned restructuring programs;
k. Prepare Schedules of Assets & Liabilities and Statements of FinancialAffairs, claims reconciliations and settlements, appropriate financial andoperational cut-off periods, development of a creditor matrix, and first daymotions support;
l. Provide testimony as required; and
m. Perform any other interim management services as mutually agreed upon.
Fees and Expenses
21.Fees in connection with this Engagement (other than the treasury advisory
function described below) will be based upon time incurred by the Additional Financial
Personnel providing the Services, multiplied by our standard hourly rates, illustrated below:
Senior Managing Directors $780-895Directors / Managing Directors $560-745Consultants / Senior Consultants $280-530Administrative / Paraprofessionals $115-230
The Debtors understand that FTI revises its rates for services periodically, and the Debtors will
pay such rates as reasonably adjusted without altering or limiting the Debtors' obligation to
compensate FTI in accordance with the Engagement Letter. The Debtors further understand that
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FTI does not provide any assurance regarding the outcome of its work and that its fees will not
be contingent on the results of such work.
22. Prior to any increases in rates as set forth in paragraph 21of the Motion,
FTI shall file a supplemental affidavit with the Court and give ten business days' notice to the
Debtors, the Office of the United States Trustee for the Southern District of New York (the "U.S.
Trustee") and any official committee, which supplemental affidavit shall explain the basis for the
requested rate increases in accordance with section 330(a)(3)(F) of the Bankruptcy Code and
indicate whether the Debtors have received notice of and approved the proposed rate increase.
Treasury Advisory Function Fixed Monthly Rate
23. For services rendered in connection with the treasury advisory function of
the scope of services, the Debtors agree to pay FTI a monthly, non-refundable advisory fee of
$65,000 for an Interim Treasurer (David Rush) and $55,000 per month each for two additional
temporary employees serving as Additional Treasury Personnel (Larry Manning and Robert
Molina). Payment of such fees is due and payable on the first business day of each month.
24.
In addition to the fees outlined above, FTI will bill reasonable direct
expenses which are likely to be incurred on the Debtors' behalf during this Engagement. Direct
expenses include reasonable and customary out-of-pocket expenses which are billed directly to
the engagement such as certain telephone, overnight mail, messenger, travel, meals,
accommodations and other expenses specifically related to the engagement. Further, if FTI
and/or any of its employees are required to testify or provide evidence at or in connection with
any judicial or administrative proceeding relating to this matter, FTI will be compensated by the
Debtors at its regular hourly rates and reimbursed for reasonable direct expenses with respect
thereto.
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Completion Fee
25. In addition to the fixed monthly rate and hourly fees and expenses, and as
more fully described in the Engagement Letter, subject to this Court's approval the Debtors have
agreed to pay FTI a completion fee of $1,250,000 (the "Completion Fee"), upon the earliest
occurrence of the following:
a. Confirmation of a Chapter 11 plan of reorganization or liquidation;or
b. The sale of substantially all of the Debtors' assets.
26. For the avoidance of any doubt, FTI acknowledges that the Completion
Fee is subject to this Court's approval based on a reasonableness standard as provided in the Jay
Alix Protocol.
Retainer Cash on Account
27. Prior to the Petition Date, the Debtors provided FTI with a retainer of
$350,000 (the "Retainer"). The Retainer shall be credited against any amounts due at the
termination of the Engagement Letter and returned to the Debtors upon the satisfaction of all
obligations owed to thereunder.
Indemnification Provisions
28. The Engagement Letter contains standard indemnification language with
respect to FTI's services. Notwithstanding such language, the Debtors and FTI have agreed that
the Debtors shall only indemnify those FTI employees serving as executive officers of the
Debtors on the same terms as provided to the Debtors' other officers and directors under the
Debtors' by-laws and applicable state law, along with insurance coverage under the Debtors'
directors' and officers' insurance policies, and the indemnification provisions of the Engagement
Letter shall not apply to FTI.
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Reporting Requirements
29. To maintain transparency, FTI would file with the Court and serve on the
Debtors, the U.S. Trustee, and any statutory committee(s) appointed in these cases (collectively,
the "Committees," and together with the Debtors and the U.S. Trustee, the "Notice Parties") a
report on staffing (the "Staffing Report") by the 20th of each month for the previous month,
which report would include the names and tasks filled by all FTI personnel involved in this
engagement. The Staffing Report (and FTI's staffing for this matter) would be subject to review
by the Court in the event so requested by any of the Notice Parties.
30.
Moreover, FTI would file with this Court, and serve upon the Notice
Parties, reports of compensation earned and expenses (the "Compensation Reports") incurred on
at least a quarterly basis. The Compensation Reports would summarize the service provided,
identify the compensation earned, itemize expenses incurred and provide for an objection period.
All such compensation would be subject to review by this Court if an objection is filed.
Dispute Resolution Provisions
31.
The Debtors and FTI have agreed, subject to the Court's approval of this
Motion, that: (a) any controversy or claim with respect to, in connection with, arising out of, or
in any way related to this Motion or the services provided by FTI to the Debtors as outlined in
this Motion, including any matter involving a successor in interest or agent of any of the Debtors
or of FTI, shall be brought in the Bankruptcy Court or the District Court for the Southern District
of New York (if the reference is withdrawn); (b) FTI and the Debtors and any and all successors
and assigns thereof, consent to the jurisdiction and venue of such court as the sole and exclusive
forum (unless such court does not have or retain jurisdiction over such claims or controversies)
for the resolution of such claims, causes of actions or lawsuits; (c) FTI and the Debtors, and any
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and all successors and assigns thereof, waive trial by jury, such waiver being informed and freely
made; (d) if the Bankruptcy Court, or the District Court (if the reference is withdrawn), does not
have or retain jurisdiction over the foregoing claims and controversies, FTI and the Debtors, and
any and all successors and assigns thereof, will submit first to non-binding mediation; and, if
mediation is not successful, then to binding arbitration, in accordance with the dispute resolution
procedures set forth in Exhibit B to this Motion; and (e) judgment on any arbitration award may
be entered in any court having proper jurisdiction. By this Motion, the Debtors seek approval of
this agreement by the Court. Further, FTI has agreed not to raise or assert any defense based
upon jurisdiction, venue, abstention or otherwise to the jurisdiction and venue of the Bankruptcy
Court or the District Court for the Southern District of New York (if the reference is withdrawn)
to hear or determine any controversy or claims with respect to, in connection with, arising out of,
or in any way related to this Motion or the services provided hereunder.
Legal Basis for Relief Requested
The Debtors Have Exercised Their Sound and Prudent Business Judgment
32.
Section 363 of the Bankruptcy Code provides that, after notice and a
hearing, a Debtor may use property of the estate other than in the ordinary course of business. A
Debtor's decision to use, sell or lease assets outside the ordinary course of business must be
based upon the sound business judgment of the debtor. See In re Chateaugay Corp., 973 F.2d
141, 143 (2d Cir. 1992) (holding that a judge determining a section 363(b) application must find
from the evidence presented before him a good business reason to grant such application); see
also In re Ionosphere Clubs, Inc., 100 B.R. 670, 674 (Bankr. S.D.N.Y. 1989) (noting that the
standard for determining a section 363(b) motion is a "good business reason"); Committee of
Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns Manville Corp.), 60 B.R. 612,
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616 (Bankr. S.D.N.Y. 1986) ("Where the debtor articulates a reasonable basis for its business
decisions (as distinct from a decision made arbitrarily or capriciously), courts will generally not
entertain objections to debtor's conduct").
33. The retention of corporate officers is proper under section 363 of the
Bankruptcy Code, and courts in this district and elsewhere have determined that such retention is
an appropriate exercise of a debtor's business judgment. See, e.g., In re Archbrook Laguna
Holdings LLC, No. 11-13292 (SCC) (Bankr. S.D.N.Y. Aug. 3, 2011) (order authorizing
retention of chief restructuring officer pursuant to sections 363(b) and 105(a) of the Bankruptcy
Code); In re Calpine Corp., No.05-60200 (BRL) (Bankr. S.D.N.Y. Jan. 17, 2007) (order
authorizing employment of interim chief financial officer pursuant to section 363 of the
Bankruptcy Code); In re Dana Corp., Case No. 06-10354 (BRL) (Bankr. S.D.N.Y. Mar. 29,
2006) (order designating chief restructuring officer and chief financial officer pursuant to section
363 of the Bankruptcy Code); In re Worldcom, et al., Case No. 02-13533 (AJG) (Bankr.
S.D.N.Y., Sept. 17, 2002) (order approving retention of crisis managers to provide chief financial
officer, chief restructuring officer and additional temporary staff as needed pursuant to section
363 of the Bankruptcy Code); see also In re Harry & David Holdings, Inc., Case No. 11-10884
(MFW) (Bankr. D. Del. Apr. 27, 2011) (order authorizing retention of Alvarez & Marsal to
provide an interim chief executive officer and chief restructuring officer and certain additional
officers and personnel).
34. Entry into the Engagement Letter and retaining the Interim Treasurer and
Additional Personnel upon the terms set forth in the Engagement Letter, this Motion, and any
order approving this Motion would enable the Debtors most efficiently to maximize value for
their estates. Thus, the Debtors believe that it would be in their best interests and in the best
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interests of their respective estates, their creditors, and other parties-in-interest for the Court to
approve the Engagement Letter and the retention of Mr. Rush as Interim Treasurer and the
Additional Personnel in accordance with the Engagement Letter, with such retention being
deemed effective as of the Petition Date.
35. The Debtors believe that FTI's fee structure is fair and reasonable in light
of the type of services being provided and is comparable to those generally charged by firms of
similar stature to FTI for comparable engagements. In addition, given the numerous issues FTI
may be required to address in these cases, FTI's commitment to the variable level of time and
effort necessary to address all such related issues as they arise, and the market prices for FTI's
services for engagements of this nature in an out-of-court context, the Debtors believe that the
FTI fee arrangement is fair and reasonable.
The Proposed Retention Comports with the Bankruptcy Code
36. FTI will provide the Notice Parties with the Staffing Reports and the
Compensation Reports. Because the Debtors are seeking to retain FTI and the Retention
Personnel pursuant to section 363 of the Bankruptcy Code and not under section 327 of the
Bankruptcy Code, FTI is not subject to the compensation requirements of sections 328, 330, and
331 of the Bankruptcy Code, and therefore, the Debtors request that fees and expenses of FTI
incurred in the performance of the above-described services be treated as an administrative
expense of the Debtors' chapter 11 estates and be paid by the Debtors in the ordinary course of
business, without the need for FTI to file fee applications or otherwise seek Court approval for
the compensation of its services and reimbursement of its expenses, other than those described
above.
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37. In addition, the Debtors are not seeking to retain FTI as a professional
under section 327 of the Bankruptcy Code. Accordingly, there is no requirement that FTI or any
of the Retention Personnel be disinterested. However, to the best of the Debtors' knowledge,
information, and belief, FTI does not have any interest materially adverse to the Debtors' estates
or any class of creditor or equity security holders, by reason of any direct or indirect relationship
to, connection with, or interest in, the Debtors, or for any other reason. With that said, FTI
believes it is disinterested because, to the best of FTI's knowledge, information, and belief, FTI
has no connection with the Debtors, their creditors, or any other party-in-interest, except as
disclosed in the Medlin Declaration.
38. Additionally, the Court's general equitable powers codified in section
105(a) of the Bankruptcy Code provide ample authority for the relief requested herein. Section
105(a) of the Bankruptcy Code empowers the Court to "issue any order, process, or judgment
that is necessary to carry out the provisions of this title." See 11 U.S.C. 105(a); see also
United States v. Energy Resources Co., 495 U.S. 545, 549 (1990); Adelphia Communications
Corp. v. The American Channel (In re Adelphia Communications Corp.), 345 B.R. 69, 85
(Bankr. S.D.N.Y. 2006) ("Section 105(a) provides broad equitable power for a Bankruptcy Court
to maintain its own jurisdiction and to facilitate the reorganization process."); In re Continental
Airlines, 203 F.3d 203, 211 (3d Cir. 2000) ("Section 105(a) of the Bankruptcy Code supplements
courts' specifically enumerated bankruptcy powers by authorizing orders necessary or
appropriate to carry out provisions of the Bankruptcy Code.")
Notice
39. No trustee or examiner has been appointed in these chapter 11 cases.
Notice of this Motion has been provided to: (a) the U.S. Trustee; (b) counsel to the Debtors'
postpetition lenders; (c) counsel to General Electric Capital Corporation, as agent under the
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Debtors' first lien asset-backed revolving credit facility; (d) counsel to Silver Point Finance,
LLC, as agent under the Debtors' first lien term loan facility and third lien credit facility; (e)
counsel to The Bank of New York Mellon Trust Company, as indenture trustee for the Debtors'
fourth lien 5% secured convertible notes; (f) counsel to the Sponsor Funds; (g) counsel to the
IBT; (h) counsel to the BCT; and (i) those creditors holding the 40 largest unsecured claims
against the Debtors' estates. The Debtors submit that no other or further notice need be provided.
No Prior Request
40. No prior request for the relief sought in this Motion has been made to this
or any other Court in connection with these chapter 11 cases.
WHEREFORE, for the reasons set forth herein, the Debtors respectfully request
that the Court enter an order, substantially in the form attached hereto as Exhibit D, granting the
relief requested herein and such other and further relief as may be just and proper under the
circumstances.
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Dated: January 11, 2012New York, New York
Filed by:
/s/ Corinne Ball
Corinne BallHeather LennoxLisa LaukitisVeerle RooversJONES DAY222 East 41st StreetNew York, New York 10017Telephone: (212) 326-3939Facsimile: (212) 755-7306
- and -
Ryan T. RouthJONES DAYNorth Point901 Lakeside AvenueCleveland, Ohio 44114Telephone: (216) 586-3939Facsimile: (216) 579-0212
PROPOSED ATTORNEYS FOR DEBTORSAND DEBTORS IN POSSESSION
Respectfully submitted,
Hostess Brands, Inc., et al.Debtors and Debtors in Possession
/s/ John StewartJohn StewartChief Financial Officer of Hostess Brands, Inc.
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EXHIBIT A
[Engagement Letter]
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EXHIBIT B
[Dispute Resolution Procedures]
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DISPUTE RESOLUTION PROCEDURES
The following procedures shall be used to resolve any controversy or claim ("dispute") as
provided in this Agreement. If any of these provisions are determined to be invalid or
unenforceable, the remaining provisions shall remain in effect and binding on the parties to the
fullest extent permitted by law.
Mediation
A dispute shall be submitted to mediation by written notice to the other party or parties.
In the mediation process, the parties will try to resolve their differences voluntarily with the aid
of an impartial mediator, who will attempt to facilitate negotiations. The mediator will be
selected by agreement of the parties. If the parties cannot agree on a mediator, a mediator will be
designated by the American Arbitration Association ("AAA") or JAMS/Endispute at the request
of a party. Any mediator so designated must be acceptable to all parties.
The mediation will be conducted as specified by the mediator and agreed upon by the
parties. The parties agree to discuss their differences in good faith and to attempt, with the
assistance of the mediator, to reach an amicable resolution of the dispute.
The mediation will be treated as a settlement discussion and therefore will be
confidential. The mediator may not testify for either party in any later proceeding relating to the
dispute. No recording or transcript shall be made of the mediation proceedings.
Each party will bear its own costs in the mediation. The fees and expenses of the
mediator will be shared equally by the parties.
Arbitration
If a dispute has not been resolved within 90 days after the written notice beginning the
mediation process (or a longer period, if the parties agree to extend the mediation), the mediation
shall terminate and the dispute will be settled by arbitration and judgment on the award rendered
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by the arbitration may be entered in any Court having jurisdiction thereof. The arbitration will
be conducted in accordance with the procedures in this document and the Arbitration Rules for
Professional Accounting and Related Services Disputes of the AAA ("AAA Rules").
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EXHIBIT C
[Declaration of J. Robert Medlin]
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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------In re
Hostess Brands, Inc., et al.,1
Debtors.
---------------------------------------------------------------
x::
:::::x
Chapter 11
Case No. 12-_____ (___)
(Jointly Administered)
DECLARATION OF
J. ROBERT MEDLIN
IN SUPPORT OF THE MOTION OF
THE DEBTORS PURSUANT TO 11 U.S.C. 105(A)
AND 363(B) TO EMPLOY AND RETAIN FTI CONSULTING,INC. TO PROVIDE THE DEBTORS AN INTERIM TREASURER
AND ADDITIONAL PERSONNEL NUNC PRO TUNCTO THE PETITION DATE
I, J. Robert Medlin, make this declaration pursuant to 28 U.S.C. 1746 and state
as follows:
1. I am a Senior Managing Directorwith FTI Consulting, Inc. ("FTI")2 a
financial advisory services and interim management firm with numerous offices throughout the
country. I am duly authorized to make this declaration (the "Declaration") on behalf of FTI and
submit this Declaration in support of the motion (the "Motion"), dated January 11, 2012, of the
above captioned debtors and debtors in possession (collectively, the "Debtors") for entry of an
order (the "Order") authorizing the Debtors to employ and retain FTI to provide the Debtors an
Interim Treasurer and Additional Personnel nunc pro tunc to the Petition Date, pursuant to 11
U.S.C. 105(a) and 363(b)and under the terms and conditions set forth in the Motion.
1 The 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).
2 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion.
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2. Except as otherwise stated in this Declaration, I have personal knowledge
of the facts set forth herein and, if called as a witness, I would testify thereto. Certain of the
disclosures set forth herein related to matters within the knowledge of other employees of FTI
and are based on information provided by them.
FTI's Qualifications
3. FTI has a wealth of experience in providing financial advisory services in
restructurings and reorganizations and enjoys an excellent reputation for services it has rendered
in large and complex chapter 11 cases on behalf of debtors and creditors throughout the United
States.
4. Furthermore, as a result of the prepetition work performed on behalf of the
Debtors over the past 6months, FTI has acquired significant knowledge of the Debtors and their
businesses and is intimately familiar with the Debtors' financial affairs and systems, capital
structure, operations and related matters. Such experience and knowledge will be valuable to the
Debtors in their efforts to reorganize. Accordingly, the Debtors wish to retain FTI to provide
assistance during this case.
5. Prior to becoming a Senior Managing Director and Southwest Region
Leader of FTI, I was a Partner and Southwest Region Leader of the U.S. division of
PricewaterhouseCoopers' Business Recovery Services Practice. I have previously represented
borrowers, debtors, lenders, creditors and equity holders in formal bankruptcies and out-of-court
restructurings. Some of my engagements include: Enron; Capmark; Baylor College of
Medicine; Pillowtex; Zale Corporation; Eljer Industries; Lomas Financial; Big West Oil; TXCO;
Age Refining; Reliant Channelview; Sunrise Energy; Global Power Equipment; Bag n baggage;
Braun's Fashions; CompuAdd; Encompass; General Wireless; Rubus Realty; Sun Healthcare; El
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Paso Electric Company; Greyhound; Harvest Foods; Minorplanet; Promedco; TWA; U.S. One
Communications; and SageCrest.
Services To Be Provided
6. Subject to this Court's approval, FTI has agreed to provide the Debtors
with an Interim Treasurer, Additional Treasury Personnel and certain Additional Financial
Personnel (collectively, the "Retention Personnel"). Among other things, the Retention
Personnel will provide assistance to the Debtors with respect to the management of the overall
restructuring process, including the development of ongoing business/financial plans and
conducting restructuring negotiations with creditors with respect to an overall strategy for their
chapter 11 cases.
7. Pursuant to the Engagement Letter,3 FTI will provide such services as FTI
and the Debtors shall deem appropriate and feasible in order to manage and advise the Debtors in
the course of the chapter 11 cases, including, but not limited to;
Interim Treasury Management Function
a.
Provide comprehensive treasury services and coordinate and directCompany employees as necessary. David Rush, Senior ManagingDirector, will serve in the capacity of Interim Treasurer for a fixedmonthly fee as described below;
b. Work with management and employees to refine the Company's existingcash flow forecasts, related analyses and reporting. Provide anyrecommendations to existing practices and methodologies; and
c. Provide additional FTI professionals to serve as Additional TreasuryPersonnel of the Company and provide support as required.
Provide FTI professionals to serve as Additional Financial Personnel of theCompany to provide services as follows, and may be requested by the
Company from time to time:
3 A copy of the Engagement Letter is attached as Exhibit A to the Motion.
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d. Assist with the Company's execution of planned liquidity enhancementinitiatives, including working capital management and cost savingsprograms;
e. Develop the Company's integrated multi-year financial projection model by brand, business unit and region through coordination and discussionwith management and Company employees;
f. Perform a detailed assessment of the Company's operations, identify performance improvement opportunities and assist management andCompany employees in implementing and executing the identifiedinitiatives;
g. Prepare other financial analysis and reporting as needed to assistmanagement in negotiations and discussions with the Company'sstakeholders;
h.
Participate in meetings and negotiations/interface with stakeholders and/ortheir advisors as necessary.
i. Prepare a comprehensive winddown plan and related liquidation analysiswith supporting schedules, and assist the Company in implementation ofsuch plan, as necessary;
j. Develop with management detailed contingency planning related topotential liquidity shortfalls or planned restructuring programs;
k. Prepare Schedules of Assets & Liabilities and Statements of Financial
Affairs, claims reconciliations and settlements, appropriate financial andoperational cut-off periods, development of a creditor matrix, and first daymotions support;
l. Provide testimony as required; and
m. Perform any other interim management services as mutually agreed upon.
FTI's Disinterestedness
8. In connection with the preparation of this Declaration, FTI conducted a
review of its contacts with the Debtors, their affiliates and certain entities holding large claims
against or interests in the Debtors that were made reasonably known to FTI. A listing of the parties
reviewed is reflected on Schedule 1 to this Declaration. FTI's review, completed under my
supervision, consisted of a query of the Schedule 1 parties within an internal computer database
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containing names of individuals and entities that are present or recent former clients of FTI. While
this review remains underway, a summary of such relationships that FTI has identified thus far
during this process is set forth on Schedule 2 to this Declaration. Upon completion of our review,
FTI will supplement this Declaration for any additional relationships identified.
9. Except as discussed below, based on the results of its review thus far, FTI
does not have a relationship with any of the parties on Schedule 1 in matters related to these
proceedings. FTI has provided and could reasonably be expected to continue to provide services
unrelated to the Debtors' chapter 11 cases for the various entities shown on Schedule 2. FTI's
assistance to these parties has been related to providing various financial restructuring, litigation
support and/or engineering and scientific investigation consulting services. To the best of my
knowledge, no services have been provided to these parties in interest which involve their rights
in the Debtors' Chapter 11 Cases, nor does FTI's involvement in these chapter 11 cases
compromise its ability to continue such consulting services.
10. FTI provided financial advisory services to the Official Unsecured
Creditors' Committee to Interstate Bakeries Corporation, the predecessor to Hostess Brands, Inc.
FTI's services related to that engagement ended July 2, 2009.
11. Judge Gropper is related to an FTI employee who serves as a senior
consultant in our forensic and litigation consulting segment. He is not part of the engagement
team and FTI will institute ethical wall procedures with respect to this FTI employee.
12. FTI provides litigation consulting services to Flowers Foods, Inc., which
is adverse to the Debtors, in Flowers Bakeries Brands, Inc. v. Interstate Bakeries Corporation
(No. 1.08-CV-02376-TWT), filed in the Northern District of Georgia. The FTI engagement
team for that assignment is separate from the engagement team for this engagement. Since June
10, 2011, the Retention Personnel have been under an engagement confidentiality agreement.
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Additionally, by a date not later than August 11, 2011, FTI established an ethical wall agreement
("Ethical Wall") in order to faithfully uphold its fiduciary duties. FTI required each member of
the respective engagement teams to execute and return to FTI's Conflicts Manager an ethical wall
agreement indicating:
a. There will be no discussions or communications (orally, electronically orotherwise) regarding the substances of the respective engagements between anypersons who are or have been involved in the Engagement and the litigationmatter described above;
b. Only the persons working on matters involving the Engagement shall be providedaccess to non-public documents or information relating to the Engagement; and
c. Further, FTI established electronic internal security walls to ensure that onlyFTI employees directly involved with or working on the Engagement mayhave access to the information, databases, e-mails, schedules or any otherinformation of or relating to the Engagement. The FTI Security Administratorwill monitor these software walls and related security periodically forcompliance with the Ethical Wall procedures described in this agreement, andany attempted or actual breaches will be reported immediately to theapplicable engagement Senior Managing Director; Eric Miller, GeneralCounsel; and Kim Cornell, Conflicts Manager.
13. As part of its diverse practice, FTI appears in numerous cases, proceedings
and transactions that involve many different professionals, including attorneys, accountants and
financial consultants, who may represent claimants and parties-in-interest in the Debtors' chapter
11 cases. Also, FTI has performed in the past, and may perform in the future, advisory
consulting services for various attorneys and law firms, and has been represented by several
attorneys and law firms, some of whom may be involved in these proceedings. In addition, FTI
has in the past, may currently and will likely in the future be working with or against other
professionals involved in these cases in matters unrelated to the Debtors and these cases. Based
on our current knowledge of the professionals involved, and to the best of my knowledge, none
of these relationships create interests materially adverse to the Debtors in matters upon which
FTI is to be employed, and none are in connection with these cases.
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14. It is FTI's policy and intent to update and expand its ongoing relationship
search for additional parties in interest in an expedient manner. If any new material relevant facts
or relationships are discovered or arise, FTI will promptly file a supplemental affidavit under
Bankruptcy Rule 2014(a).
Professional Compensation
15. As set forth in the Engagement Letter, fees in connection with this
Engagement (other than the treasury advisory function described below) will be based upon time
incurred by the Additional Financial Personnel providing the Services, multiplied by our
standard hourly rates, illustrated below:
Senior Managing Directors $780-895Directors / Managing Directors $560-745Consultants / Senior Consultants $280-530Administrative / Paraprofessionals $115-230
The Debtors understand that FTI revises its rates for services periodically, and the Debtors will
pay such rates as reasonably adjusted without altering or limiting the Debtors' obligation to
compensate FTI in accordance with the Engagement Letter. FTI does not provide any assurance
regarding the outcome of its work and that its fees will not be contingent on the results of such
work.
16. Prior to any increases in rates as set forth in paragraph 15 of this
Declaration, FTI shall file a supplemental affidavit with the Court and give ten business days'
notice to the Debtors, the Office of the United States Trustee for the Southern District of New
York (the "U.S. Trustee") and any official committee, which supplemental affidavit shall explain
the basis for the requested rate increases in accordance with section 330(a)(3)(F) of the
Bankruptcy Code and indicate whether the Debtors have received notice of and approved the
proposed rate increase.
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17. For services rendered in connection with the treasury advisor function of
the scope of services, the Debtors agree to pay FTI a monthly, non-refundable advisory fee of
$65,000 for an Interim Treasurer (David Rush) and $55,000 per month each for two additional
temporary employees serving as Additional Treasury Personnel (Larry Manning and Robert
Molina). Payment of such fees is due and payable on the first business day of each month.
18. In addition to the fees outlined above, FTI will bill reasonable direct
expenses which are likely to be incurred on the Debtors' behalf during this Engagement. Direct
expenses include reasonable and customary out-of-pocket expenses which are billed directly to
the engagement such as certain telephone, overnight mail, messenger, travel, meals,
accommodations and other expenses specifically related to the engagement. Further, if FTI
and/or any of its employees are required to testify or provide evidence at or in connection with
any judicial or administrative proceeding relating to this matter, FTI will be compensated by the
Debtors at its regular hourly rates and reimbursed for reasonable direct expenses with respect
thereto.
19.
In addition to the fixed monthly rate and hourly fees and expenses, and as
more fully described in the engagement letter, subject to this Court's approval the Debtors have
agreed to pay FTI a completion fee of $1,250,000 (the "Completion Fee"), upon the earliest
occurrence of the following:
a. Confirmation of a Chapter 11 plan of reorganization or liquidation;or
b.
The sale of substantially all of the Debtors' assets.
20. For the avoidance of any doubt, FTI acknowledges that the Completion
Fee is subject to this Court's approval based on a reasonableness standard as provided in the Jay
Alix Protocol.
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21. Prior to the Petition Date, the Debtors provided FTI with a retainer of
$350,000 (the "Retainer"). The Retainer will be credited against any amounts due at the
termination of the Engagement Letter and returned to the Debtors upon the satisfaction of all
obligations owed to thereunder.
22. According to FTI's books and records, during the 90 days prior to the
petition date, FTI received $1,520,040.48 in fees and expenses. As of the petition date FTI
estimates they held Cash on Account of $350,000. The Debtors and FTI have agreed that any
portion of the advance payments not used to compensate FTI for its prepetition services and
expenses will be held and applied against its final post-petition billing and will not be placed in a
separate account.
23. To the best of my knowledge, (a) no commitments have been made or
received by FTI with respect to compensation or payment in connection with these cases other
than in accordance with the provisions of the Bankruptcy Code, and (b) FTI has no agreement
with any other entity to share with such entity any compensation received by FTI in connection
with these chapter 11 cases.
24. I have read the motion of the Debtors for an order approving the
employment and retention of FTIthat accompanies this Declaration and, to the best of my
knowledge, information and belief, the contents of such motion are true and correct.
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I declare under penalty of perjury that the foregoing is true and correct.
Executed on January 11, 2012
FTI CONSULTING, INC.
By: /s/ J. Robert Medlin
Name: J. Robert MedlinTitle: Senior Managing Director
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Schedule 1 to the Declaration
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SCHEDULE 1 OF DECLARATION
Listing of Parties-In-Interest Reviewed for Current Relationships
The Debtors
Hostess Brands, Inc.
IBC Sales CorporationIBC Services, LLC
IBC Trucking, LLC
Interstate Brands Corporation
MCF Legacy, Inc.
Names of Debtors Filing Petitions in the Debtors' Previous Chapter 11 Cases (And Not Identified Above)
Armour and Main Redevelopment Corporation
Baker's Inn Quality Baked Goods, LLC
Interstate Bakeries Corporation
Mrs. Cubbison's Foods, Inc.
New England Bakery Distributors, L.L.C.
All Other Names Used by the Debtors in the Previous Eight Years (Including Trade Names)
Baker's Inn
Beefsteak
Bread du Jour
Brown's Bakery
Butter-Nut
Butter-Nut Bakeries
Colombo Bakery
Continental Baking Company
Cotton's Holsum
Cotton's Holsum Bakeries
Di Carlo BakeryDolly Madison
Dolly Madison Bakery
Drake's
Drake's Bakery
Eddy's
Eddy's Bakery
Grandma Emilie's
Grandma Emilie Brown's Bakery
Holsum Bakery
Home Pride
Hostess
Hostess Bakeries
IBC Hostess Services, LLC
Interstate Brands West Corporation
Interstate Brands Companies
J.J. Nissen Bakery
Merita
Merita Bakeries
Millbrook Bakeries
My Bread Bakery
SCHEDULE 1
Page 1 of 14
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Nature's Pride
Pantry Pride
Parisian Bakery
San Francisco French Bread Company
Sunbeam
Sunbeam Bakery
SweetheartSweetheart Bakery
Standish Farms
Weber's Bread
Wonder
Wonder Bakeries
Wonder/Hostess Bakeries
Current Directors and Officers of Hostess Brands, Inc.
Altizer, Jeffrey
Birgfeld, Steven D.
Cahill, John T.
Driscoll, Brian J.Duran, Michael
Herenstein, Andrew J.
Hobbs, Richard L.
Kissick, Jr., Robert M.
Knipp, Christopher J.
Lavine, Lawrence N.
Loeser, David A.
Magill, Kent B.
Minnetian, Christopher
Murphy, Gregory B.
Reganato, David
Ross, MarthaSeban, Richard C.
Singer, Leonard
Stewart, John O.
Wandschneider, Gary K.
Former Directors and Officers of Hostess Brands, Inc.
Adams, Randall
Flowers, Daniel R.
Akeson, John C.
Jung, Craig
Lavelle, Timothy
Lewis, Frank
Mathews, Suresh
Schneider, Bill
Spielvogel, Scott
Swanston, William
Vance, J. Randall
Verstraete, Stephany
Current Directors and Officers of Debtors Other Than Hostess Brands, Inc. (And Not Identified Above)
SCHEDULE 1
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Angst, Daniel G.
Bilello, Lawrence R.
Cooper, Steven P.
Dibble, James W.
Walsh, Mark A.
Hostess Brands, Inc. Equity OwnershipArrow Distressed Securities Fund
Driscoll, Brian
Gephardt Group Labor Advisory Services
IBC Investors I, LLC
IBC Investors II, LLC
IBC Investors III, LLC
Jung, Craig D.
Mars & Co. Consulting LLC
Monarch Debt Recovery Master Fund Ltd
Monarch Opportunities Master Fund Ltd
Monarch Income Master Fund Ltd
McDonnell Loan Opportunity Ltd.Schultze Apex Master Fund, Ltd.
Schultze Master Fund, Ltd.
SPCP Group, LLC
Ultimate Owners of the Debtors
McDonnell Investment Management LLC
Monarch Alternative Capital L.P.
Ripplewood Holdings L.L.C.
Silver Point Finance, LLC
Certain Competitors of the Debtors
Flowers Foods, Inc.George Weston Limited
Grupo Bimbo, S.A.
McKee Foods Corporation
Sara Lee Corporation
Debtors' Professionals and Service Providers
Accenture LLP
Arent Fox LLP
Ernst & Young LLP
ESIS Inc.
Fisher & Phillips LLP
FTI Consulting
Houlihan Lokey Capital Inc.
Jefferson Wells International Inc.
Jones Day
KPMG
Lockton Companies LLC
Kurtzman Carson Consultants LLC
Mars & Co. Consulting LLC
Marsh USA Inc.
SCHEDULE 1
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Perella Weinberg Partners LP
Sitrick and Company
Skadden Arps Slate Meagher & Flom
Stinson Morrison Hecker
Venable LLP
Known Professionals for Certain Significant Nondebtor Parties in InterestConway Del Genio Gries & Co., LLC
Cravath, Swaine & Moore LLP
Debevoise & Plimpton LLP
Fulbright & Jaworski LLP
Lazard Ltd.
Locker Associates Inc.
Glanzer & Co. LLC
MAEVA Advisors, LLC
Paul, Hastings, Janofsky & Walker LLP
Paul, Weiss, Rifkind, Wharton & Garrison LLP
Richards Kibbe & Orbe LLP
Willkie, Farr & Gallagher LLP
Major Secured Lenders Under The Debtors' Senior Secured Revolving Credit Facility And The Agents Thereunder
GE Capital Markets, Inc.
General Electric Capital Corporation (as Administrative Agent)
Wells Fargo Bank, N.A.
Major Secured Lenders Under The Debtors' First Lien Term Loan Facility And The Agents Thereunder
Altai Capital Master Fund Ltd.
Archer Capital Master Fund L.P.
Archer SIF II LP
Arizona State Retirement System
BA/CSCredit 1 LLCCandlewood Credit Value Master Fund
Cerberus Series Four Holdings, LLC
Credit Suisse Loan Funding LLC
Field Point III, Ltd.
Field Point IV, Ltd.
Gannett Peak CLO I, Ltd.
Goldman Sachs Lending Partners LLC
H Senior Income Fund LLC
Hastings Master Fund LP
HSBC Distressed Opportunities Master Fund Ltd.
JPMorgan Chase Bank, N.A.
McDonnell Loan Opportunity Ltd.
Monarch Master Funding Ltd.
Morgan Stanley Senior Funding, Inc.
NB Distressed Debt Investment Fund Ltd.
Schultze Apex Master Fund, Ltd.
Silver Point Finance, LLC (as Administrative Agent)
SPF CDO I, Ltd.
Talamod Capital Partners, LP
UBS AG, Stamford Branch
SCHEDULE 1
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VR Global Partners LP
Major Secured Lenders Under The Debtors' Third Lien Term Loan Facility And The Agents Thereunder
Arizona State Retirement System
Arrow Distressed Securities Fund
BA/CSCREDIT 1 LLC
Bank of America, N.A.Candlewood Credit Value Master Fund II, L.P.
Courage Special Situations Master Fund, LP
CVP Distressed Fund LP
Deutsche Bank Trust Company Americas
Deutsche Bank, AG New York Branch
H Senior Income Fund LLC
HFR ED Courage Special Situations Master Trust
Indonesian Shrimp Co.
Lehman Commercial Paper Inc
McDonnell Loan Opportunity Ltd.
McDonnell Loan Opportunity Ltd.
Monarch Master Funding Ltd.Morgan Stanley Senior Funding, Inc.
Promethean Managers, LLC
Rockview Trading Ltd.
Schultze Apex Master Fund, Ltd.
Schultze Master Fund, Ltd.
Silver Point Finance, LLC (as Administrative Agent)
SPCP Group, LLC
The Bank of Nova Scotia
Yucaipa American Alliance (Parallel) Fund I, LP
Yucaipa American Alliance Fund I, LP
Holders of 5% Secured Convertible PIK-Election Series A and B Notes and 10% Secured Convertible PIK-ElectionSeries C Notes and the Indenture Trustee Thereunder
Arrow Distressed Securities Fund
Deutsche Bank AG New York Branch
Deutsche Bank Trust Company Americas
Hare & Co.
IBC Investors I, LLC
IBC Investors II, LLC
IBC Investors III, LLC
Indonesian Shrimp Co.
J.P. Morgan Securities LLC (formerly Inc.)
Lehman Commercial Paper Inc.
McDonnell Loan Opportunity Ltd.
Monarch Master Funding Ltd.
Rockview Trading, Ltd.
Schultze Apex Master Fund, Ltd.
Schultze Master Fund, Ltd.
SPCP Group, LLC
Swiss Re Financial Products Corporation
The Bank of Nova Scotia
Yucaipa American Alliance (Parallel) Fund I, LP
SCHEDULE 1
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Yucaipa American Alliance Fund I, LP
The Bank of New York Mellon Trust Company, N.A. (as Indenture Trustee)
Additional Material Lienholders
7-11 Corporation
APEX Cold Storage
Baker Transfer & StorageDiversified Transfer and Storage #1423392
Glacier Cold Storage
Groves Faison
Hunter Creek Warehouse (Park Creek Venture)
International Transit & Storage
MBM Corp
Merchandise Warehouse
Millard Refrigerated Services
Ress Properties (Kent Lindemuth Warehouse)
Parties to Recent Material Transactions with the Debtors
Lee & Associates Inc.Sugar Foods Corp.
Debtors' Current and Former Depository and Disbursement Banks and Financial Institutions With Which the
Debtors Maintain Accounts
ADM Investor Services, Inc.
Bank of America
Bank of Oklahoma
Bank of the West
Banknorth MA
Banknorth, N.A.
Banknorth Vermont
Columbus Bank & TrustComerica
Fifth Third Bank
First National Bank of Alaska
First Tennessee Bank
Franklin Savings Bank
Franklin Bank
Harris Trust
JP Morgan Chase
National City Bank
Penson GHCO
PNC Bank
RBC Bank
Regions Bank
Sovereign Bank
United Missouri Bank
Union Bank
Wachovia Securities
Wells Fargo Bank, N.A.
Zions Bank
SCHEDULE 1
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Major Vendors of the Debtors
ADM Inc.
Ag Processing
Amalgamated Sugars
American Pan/Pan Glo
American Yeast
BagcraftBarry Callebaut
Bay State Milling Co.
Blommer Chocolate Co.
Bunge North America
Calise & Sons Bakery Inc.
Caravan Ingredients
Cargill Inc.
Cereal Food Processors
Comdata Corporation
Conagra Foods
Dakota Specialty
DaniscoDelavau LLC
Domino Sugar
Flavor Solutions
Fleischmann Yeast
General Mills
Glopak
Groeb Farms
HC Brill
Hoogwegt
International Molasses
International Paper
LeSaffre YeastLoders Croklaan
Main Street Ingredients
Mallet
Malnove Inc. of Nebraska
Manildra Milling
Manpower Inc.
Michael's Foods
Milner Milling
National Starch
Perfect Commerce
Pliant Corp.
Prestige Pak Inc.
Roquette
Siemer Milling
Sonstegard Foods
South Chicago Packing Co.
Speedway
Speedway SuperAmerica
St. Johns Packaging Ltd.
Tate and Lyle Public Limited Company
SCHEDULE 1
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TJ Harkings
United Sugars Corp.
UPS
Debtors' 40 Largest Unsecured Creditors as Identified in the Debtors' Chapter 11 Petitions
Accenture LLP
ADM, Inc.Bakery & Confectionery Union & Industry International Pension Fund
Bakery Drivers and Salesman Industry Pension Fund
Berry Plastics Corp.
Blommer Chocolate Co.
Bunge North America
Calise & Sons Bakery Inc.
Caravan Ingredients
Cargill Inc.
Central Pension Fund of the IUOE
Central States, Southeast and Southwest Areas Pension Plan
Cereal Food Processors
Chicago Display Marketing Corp.Cleveland Bakers and Teamsters Pension Fund
Cloverhill Pastry Vending Corp.
Comdata Corporation
CSM Bakery Products
Dakota Specialty Milling
Delavau LLC
General Mills
I.A.M. National Pension Plan
Independence Blue Cross
Local 734 Pension Fund
Lockton Companies LLC
Malnove Inc. of NebraskaManildra Milling
Manpower Inc.
MSC Industrial
New England, Teamsters & Trucking Industry Pension Fund
Northern New England Benefit Trust
Ortran Inc.
Philadelphia Bakery Employers & Food Driver Salesmens Union Local 463 & Teamsters Local 676 Pension Plan
Retail, Wholesale & Department Store International Union and Industry Pension Fund
Service Warehouse Corp.
Southern California Bakery Security Fund
Speedway Superamerica LLC
The Goodyear Tire & Rubber Co.
United Sugars Corp.
Western Conference of Teamsters Pension Plan
Significant Utility Providers
Access Point
Alabama Power
Amerada Corporation
Ameren Illinois
SCHEDULE 1
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AT&T
City of Emporia
City of Seattle
ComEd
Matrix Telecom Inc.
Nicor Gas
Northwestern EnergyPassaic Valley Sewerage
Southwest Gas Corp.
The Gas Company
Township of Wayne
Verizon
Water Revenue Bureau (Philadelphia, PA)
Xcel Energy
Beneficiaries and Issuers of Letters of Credit
ACE American Insurance Company
Comerica Bank
Director of Rhode Island Workers CompensationFlorida Power & Light Company
Florida Self-Insurers Guaranty Association, Inc.
Hartford Fire Insurance Company
Kansas Dept. of Human Resources
Louisiana Department of Labor
Ohio Bureau of Workers Compensation
Oklahoma Workers' Compensation Court
Peoples Gas System
Self-Insurance Division, Bureau of Workers' Compensation (Harrisburg, PA)
State of Connecticut
State Of Michigan
Tampa Electric CompanyTravelers Casulty & Surety Company of America
Travelers Indemnity Company
United States Fidelity and Guaranty Company
Counterparties to Hedging Arrangements
AG Processing Inc.
Archer-Daniels-Midland Company
Bartlett Milling
Bay State Milling Co.
Blommer Chocolate Co.
Bunge North America
Cereal Food Processors
Conagra Foods
Horizon Milling, LLC
Mennel Milling Co.
Milner Milling Co.
Roquette America Inc.
Siemer Milling Co.
Major Lessors and Related Entities
SCHEDULE 1
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17201 Figueroa LLC
Aircraft Bolt Corp.
APC Capital Partners
Boise Capital Partners
Bristol Properties Inc.
Brookdale Properties LLC
Carson Madrona Co. LLCCentury Warehousing Inc.
CRP Institutional Investors LP
Darwin C. Parrish
Sonja G. Parr
Donald J. Bruzzone
Donna J. Bruzzon
Eastgroup Properties LP
Future Home Inc.
JSLB LLC
MBWCA VII Associates Inc.
Park Creek Venture
Piedmont Operating Partnership LPPrologis TLF (Las Vegas) LLC
Russo Development LLC
S&D Wells Investments LLC
Seminary Road LLC
Severson Ranch Partnership
Thompson Road Associates LLC
VT One LLC
National Unions Representing Significant Number of Debtor Employees
Bakery, Confectionery, Tobacco Workers & Grain Millers International Union.
International Brotherhood of Teamsters
Parties to Other Significant Contracts with the Debtors
Banc of America Merchant Services, LLC
Oce Imagistics, Inc.
Oce North America
Common Carriers, Customs Brokers and Warehousemen to the Debtors
ABF Freight Services
CR England Inc.
CH Robinson Worldwide
Fleet Global Services Inc.
Greatwide Dedicated Transport
HLN Services
International Transit & Storage
Interstate Distributor Co.
Kansas Continental Express
Ortran Inc.
RDG Truckin LCC
Redline
Select Space
Strive Logistics
SCHEDULE 1
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The Custom Companies
Totem Ocean Trailer Express
Universal Am-Cam Ltd.
YRC Inc.
Parties to Litigation with the Debtors
Baker, KaraBernhard, Kimberly
Blackshear, Venus
Blood, Curtis
Boyle, George
Brooks, Anthony
Browder's Maximum Security ATS
Connecticut Dep't of Labor Investigation
Dewitt, Donna
Flowers Bakeries Brands Inc.
Gallion, Ola
Hall, Derek
Halvorson, CoraHedback, John A.
Henderson, Tyrone
Johnson, Adam
Jones, Bryan
Kaye, William S.
Lorenz (Kuhn), Lizette
Loy, Timothy
Lucchesi, Richard
Madera, Ana
Matter, Marc
Mazim's Nutricare (d/b/a Papa Pita Bakery)
McKinzy, Michael, Sr.Northwest Administrators
OneBeacon Insurance Company
Pigford, Michael
Rutherford, Lewis, Sr.
Scheinfeld, Craig
Scott, Alice
Turner, LeJuan
Werwinski, Charlene
Whitfield, Charles
Zielinski, Todd
Parties to Material License Agreements with the Debtors
Alaska Pride Baking Company
American Bakers Cooperative
Delavau, LLC
Evrilholder Products, LLC
Gonzales Enterprises, Inc. d/b/a Fifth Sun Graphics
International Foods Company
Rasta Imposta, Inc.
Sara Lee Corp. (successor to Heilman Baking Company)
SCHEDULE 1
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SBC Services
Sun-Maid Growers of California
The Federated Group
The Long Company
Major Insurers and Insurance Brokers
ACE American Ins. Co.Allied World Assurance Co.
American International Specialty Lines Ins. Co.
Arch Insurance Co.
Darwin Select Ins. Co.
Fireman's Fund Ins. Co.
Illinois Union Ins. Co.
Lexington Ins. Co.
Liberty Mutual Fire Ins. Co.
Lloyd's of London
Lockton Companies LLC
Marsh USA Inc.
Princeton Excess & Surplus Lines Ins. Co.RSUI Indemnity Co.
Safety National Casualty Corp.
St. Paul Fire & Marine Ins. Co.
Travelers Property Casualty Co. of America
XL Insurance America, Inc.
Major Benefits Administrators
Blue Cross Blue Shield
Broadspire Services Inc.
Cigna Behavioral Health
Delta Dental Insurance Co.
Eyemed Vision Care (ECPA)Employer Self Insurance Service (ESIS)
John Eastern Company
M&I Trust Co.
Principle Life Insurance Co.
Vision Service Plan - IC
Additional Third Party Administrators
ADP, Inc.
Harland Technology Services
Significant Multi Employer Pension Plans
Alaska Teamster-Employer Pension Plan
Automobile Mechanics Local No. 701 Union and Industry Pension Fund
Automotive Industries Pension Plan
Automotive Machinist Pension Plan
Bakers Local No. 433 Pension Plan
Bakery & Confectionery Union & Industry International Pension Fund
Bakery and Sales Drivers Local Union 33 Industry Pension Fund
Bakery Drivers and Salesman Local 550 and Industry Pension Fund
Bakery Drivers and Salesmen Local 194 and Industry Pension Fund
SCHEDULE 1
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Central Ohio UFCW Unions and Retail Employers Pension Plan
Central Pension Fund of the IUOE & Participating Employers
Central States, Southeast and Southwest Areas Pension Plan
Cleveland Bakers and Teamsters Pension Fund
District No. 9, International Association of Machinists and Aerospace Workers Pension Plan
Employer-Teamsters Local Nos. 175 & 505 Pension Plan
I.A.M. National Pension PlanIndiana Teamsters Pension Fund Pension Plan
IUOE Stationary Engineers Local 39 Pension
Local 734 Pension Fund
Milwaukee Drivers Pension Plan
New England Teamsters & Trucking Industry Pension Fund
New York State Teamsters Conference Pension & Retirement Fund
Oregon Retail Employees Pension Plan
Philadelphia Bakery Employers & Food Driver Salesmens Union Local 463 & Teamsters Local 676 Pension Plan
Retail, Wholesale & Department Store International Union and Industry Pension Fund
Richmond Teamsters & Industry Pension Plan
Sound Retirement Trust (f/k/a Retail Clerks Pension Plan)
Teamsters Local 639 Employers Pension TrustTeamsters Negotiated Pension Plan
Teamsters Union Local 142 Pension Trust Fund
Teamsters Union Local No. 52 Pension Fund
The National Conference of Firemen and Oilers National Pension Fund
Twin Cities Bakery Drivers Pension Fund
UFCW - Northern California Employers Joint Pension
UFCW District Union Local Two and Employers Pension Plan (f/k/a Kansas City Area Retail Food Store Employees
Pension Plan)
United Food & Commercial Workers Unions & Employers Midwest Pension Fund
United Food and Commercial Workers Unions and Employers Pension Plan
Upstate New York Bakery Drivers and Industry Pension Fund
Western Conference of Teamsters Pension PlanWestern Pennsylvania Teamsters and Employers Pension Plan
Bankruptcy Judges for the Southern District of New York
Chief Judge Arthur J. Gonzalez
Judge Stuart M. Bernstein
Judge Shelley C. Chapman
Judge Robert D. Drain
Judge Robert E. Gerber
Judge Martin Glenn
Judge Allan J. Gropper
Judge Sean H. Lane
Judge Burton R. Lifland
Judge Cecelia G. Morris
Judge James M. Peck
The Attorneys for the United States Trustee's Office for the Southern District of New York
Davis, Tracy Hope
Gasparini, Elisabetta
Golden, Susan
Khodorovsky, Nazar
SCHEDULE 1
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Masumoto, Brian S.
Morrissey, Richard C.
Nakano, Serene
Schwartz, Andrea B.
Schwartzberg, Paul K.
Riffkin, Linda A.
Velez-Rivera, AndyZipes, Greg M.
SCHEDULE 1
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NYI-4357899v7
Schedule 2 to the Declaration
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SCHEDULE 2 OF DECLARATION
Parties-In-Interest Noted for Court Disclosure
The Debtors
Hostess Brands, Inc.
IBC Sales CorporationIBC Services, LLC
IBC Trucking, LLC
Interstate Brands Corporation
Names of Debtors Filing Petitions in the Debtors' Previous Chapter 11 Cases (And Not Identified Above)
Armour and Main Redevelopment Corporation
Baker's Inn Quality Baked Goods, LLC
Interstate Bakeries Corporation
Mrs. Cubbison's Foods, Inc.
New England Bakery Distributors, L.L.C.
All Other Names Used by the Debtors in the Previous Eight Years (Including Trade Names)Holsum Bakery
IBC Hostess Services, LLC
Sunbeam
Wonder
Current Directors and Officers of Hostess Brands, Inc.
Hobbs, Richard L.
Magill, Kent B.
Former Directors and Officers of Hostess Brands, Inc.
Lewis, Frank
Schneider, Bill
Current Directors and Officers of Debtors Other Than Hostess Brands, Inc. (And Not Identified Above)
Angst, Daniel G.
Hostess Brands, Inc. Equity Ownership
Arrow Distressed Securities Fund
Gephardt Group Labor Advisory Services
IBC Investors I, LLC
IBC Investors II, LLC
IBC Investors III, LLC
Monarch Debt Recovery Master Fund Ltd
Monarch Opportunities Master Fund Ltd
McDonnell Loan Opportunity Ltd.
Schultze Master Fund, Ltd.
SPCP Group, LLC
Ultimate Owners of the Debtors
McDonnell Investment Management LLC
Monarch Alternative Capital L.P.
Ripplewood Holdings L.L.C.
SCHEDULE 2
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Silver Point Finance, LLC
Certain Competitors of the Debtors
Flowers Foods, Inc.
George Weston Limited
Grupo Bimbo, S.A.
McKee Foods CorporationSara Lee Corporation
Debtors' Professionals and Service Providers
Accenture LLP
Arent Fox LLP
Ernst & Young LLP
ESIS Inc.
Fisher & Phillips LLP
FTI Consulting
Jefferson Wells International Inc.
Jones Day
KPMGLockton Companies LLC
Kurtzman Carson Consultants LLC
Marsh USA Inc.
Perella Weinberg Partners LP
Sitrick and Company
Skadden Arps Slate Meagher & Flom
Stinson Morrison Hecker
Venable LLP
Known Professionals for Certain Significant Nondebtor Parties in Interest
Conway Del Genio Gries & Co., LLC
Cravath, Swaine & Moore LLPDebevoise & Plimpton LLP
Fulbright & Jaworski LLP
Paul, Hastings, Janofsky & Walker LLP
Paul, Weiss, Rifkind, Wharton & Garrison LLP
Willkie, Farr & Gallagher LLP
Major Secured Lenders Under The Debtors' Senior Secured Revolving Credit Facility And The Agents Thereunder
GE Capital Markets, Inc.
General Electric Capital Corporation (as Administrative Agent)
Wells Fargo Bank, N.A.
Major Secured Lenders Under The Debtors' First Lien Term Loan Facility And The Agents Thereunder
Archer Capital Master Fund L.P.
Arizona State Retirement System
BA/CSCredit 1 LLC
Cerberus Series Four Holdings, LLC
Credit Suisse Loan Funding LLC
Field Point III, Ltd.
Field Point IV, Ltd.
Gannett Peak CLO I, Ltd.
SCHEDULE 2
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Goldman Sachs Lending Partners LLC
HSBC Di