Hostess Sells Remaining Bread Assets To Mountain States For $28.85 Million

by Tara Arick on April 12, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

The federal bankruptcy judge presiding over the Chapter 11 bankruptcy of Hostess Brands Inc. on April 9 approved the sale of the company’s bread assets to Mountain States Bakeries LLC, which paid a deposit of $ 1.5 million in anticipation of the full purchase price of $ 28.85 million pursuant to the asset sale agreement (In Re: Hostess Brands Inc., No. 12-22052, Chapter 11, S.D. N.Y. Bkcy.).

(Order available 80-130417-018R )

Bread Assets

Hostess filed for Chapter 11 bankruptcy on Jan. 11, 2012, in the U.S. Bankruptcy Court for the Southern District of New York. A year later to the day, Hostess moved for approval of a proposal to sell the majority of its bread business to Flowers Foods Inc. for $ 360 million.

However, the Northwest Bakeries assets remained unpurchased.

Mountain States, a wholly owned subsidiary of United States Bakery, outbid 13 other potential buyers and agreed to purchase the Northwest Bakeries business assets, which comprise products branded as Sweetheart, Grandma Emilie’s and Eddy’s.

Free And Clear

Bankruptcy Judge Robert D. Drain ruled that Hostess could sell the Northwest Bakeries business assets “free and clear of all liens, claims, rights, liabilities, encumbrances and other interests of any kind or nature whatsoever, including, without limitation, any debts arising under or out of, in connection with, or in any way relating to, any acts or omissions, obligations, demands, guaranties, rights, contractual commitments, restrictions, product liability claims, environmental liabilities, employee pension or benefit plan claims, multiemployer benefit plan claims, retiree health care or life insurance claims of Hostess, and any transferee or successor liability claims, rights or causes of action, whether arising prior to or subsequent to the commencement of these cases, whether known or unknown.”

The U.S. attorney for the Southern District of New York had objected to Hostess’ sale of its bread assets, contending that it would improperly release the purchaser of those assets from potential environmental liability related to properties that would be sold as part of the transaction.


Specifically, U.S. Attorney Preet Bharara contended that the Bankruptcy Court should deny Hostess’ motion to sell its assets because it would diminish or eliminate the U.S. government’s ability to enforce its general police and regulatory powers as they relate to environmental laws.

The bankruptcy judge said that if the sale could not be made free and clear of all encumbrances, there would have been no asset sale; therefore, he ruled that Mountain States – or another purchaser, should the deal with Mountain States fall through – would not be liable for any claims against the Northwest Bakeries business assets.

Hostess is represented by Corinne Ball of Jones Day in New York, Frederick W.H. Carter of Venable in Baltimore, Ira L. Herman of Thompson & Knight in New York and Paul M. Hoffman of Stinson Morrison & Hecker in Kansas City, Mo.

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