Private Equity

If Only Twinkies Maker Had Had Someone Whose Job It Was To Remember Not To Go Bankrupt

Stephen Lubben at DealBook noticed something kind of amazing in the Hostess Brands bankruptcy case:

Turns out that Hostess has no treasury department. Indeed, it apparently doesn’t have anyone who can perform treasury functions at all.

The company has asked the bankruptcy court for permission to hire FTI Consulting to do the work. Apparently Hostess does not have much of a finance department either, since FTI is also providing employees for that department.

If approved, FTI will provide three people to staff Hostess’ treasury department. The interim treasurer gets monthly fees that work out to an annual salary of $780,000. His two deputies get $660,000 per year, each.

The finance department group gets paid hourly rates that top out at $895 per hour. You might think that would supplant the need for a financial adviser in the case, but Hostess is asking to retain one of those, too.

Now that maybe goes a little overboard on the grave-dancing (lots of, really all, companies with full honest-to-goodness treasury and finance staffs still hire advisers in bankruptcy) but, still: that is kind of weird! If you read Hostess’s motion and the attached engagement letter, it appears that they’re just seeking signoff on an arrangement they struck in June. So they’ve been operating for at least six months or so with an outside consultant as their contract treasurer – and with the rest of their treasury roles filled either by other consultants or by nobody. That’s somewhat unusual for a company with 19,000 employees, a pension plan, and something like $1bn in enterprise value.*

I don’t really know what’s going on here but just for fun let’s blame private equity! In this connection, it’s worth noting that Hostess has been down this road before and was acquired out of bankruptcy in 2009 by Ripplewood Holdings. Private equity firms are, of course, rapacious scum put on earth solely to destroy the jobs of innocent hard-working Americans, so sayeth Newt, and if you like you can put that interpretation on Ripplewood here, or not, whatever. That will be determined by a series of campaign ads and op-eds, though it’s worth noting that Ripplewood had the decency to pluck Hostess out of Chapter 11 and keep it alive for over two years before re-bankrupting it.

But I think this oddity illustrates another aspect of private equity firms, which is that their deals-‘n’-finance operations tend to be comically lean and intensively supported by outside advisers. This can sometimes make them very unpleasant to work with as a service provider: whereas working with public companies involves legions of finance staff, in-house lawyers, etc. with long careers at the company who do a whole lot of the necessary work (diligence, preparing presentations, etc.) for a merger or a financing, working with private equity often involves some 26-year-old who’s put in charge of babysitting the bankers and lawyers and pretty much outsources everything to them. There is no bitterness in this description what. so. ever. And when neither the PE firm nor its bankers and lawyers have expertise in something, they tend to have the budget and mindset to go and find the leading expert in the field to consult. When I worked with private equity firms I occasionally found myself on very, very expensive conference calls.

That actually always struck me as a pretty good model for deal-making: you have a lean, fully committed, highly paid internal team supplemented by highly motivated financial and legal advisers and by the best consultants money can rent by the hour. It’s a very very top-line focused approach, which has to be the right way to do an LBO: if you get a big acquisition right, the returns will dwarf a few $10,000 checks for half-hour conversations with consultants, so those consultants will look like a bargain if they get you comfortable with the deal. (And if they get you to pass on a bad deal, even better.) It’s arguably a good way to get a financing done: the private equity staff are repeat players in the financing markets and will be better at most aspects of their deals than the average small-to-midcap corporate staff. Hostess raised little slugs of money over the last year from Ripplewood and other funds, and my guess is that Ripplewood was more instrumental in getting those deals done than the treasurer they bused in from FTI.

But it’s a weird way to actually run a company’s day-to-day treasury operations, and not really in keeping with the traditional view of private equity as being relentlessly bottom-line focused in operations. Lubben suggests that they consider hiring a treasury staff via Craigslist and, yeah, kind of, right? It seems unlikely that Hostess was driven into bankruptcy either by financial inattentiveness or by exorbitant bills for its treasury department, but this story sure suggests some combination of inattentiveness and profligacy. And in an environment that’s suddenly gotten all hostile for private equity, seeking to cut benefits for your manufacturing workers while looking inattentive and profligate with your financial staff doesn’t seem like the best PR move.

Hostess Has a Lot of Debt, but Few in Finance [DealBook]

* Strictly speaking $981mm in assets, supposedly; getting at the enterprise value from the right side of the balance sheet is rather nebulous but includes in any case well north of a billion in debt at face.

89 comments
(hidden for your protection)
Show all comments

89 Responses to “If Only Twinkies Maker Had Had Someone Whose Job It Was To Remember Not To Go Bankrupt”

  1. superdadinnj says:

    So wait, you're saying there is a job there

  2. P. North says:

    I would like to contract my Twinkie cream filling services to Hostess.

  3. blah says:

    "…that is kind of weird!"

    Precious.

  4. Predatornado says:

    So, when is Mark getting fired? I mean, come on! People! Let us call a chart a chart here!

  5. Buboe says:

    best captions ever on a Matt article

  6. Bitchtern says:

    "There is no bitterness in this description what. so. ever."

    Strong.

  7. WhatBid? says:

    Let the hoarding begin!

  8. Emma says:

    I'm reading this…

    "The finance department group gets paid hourly rates that top out at $895 per hour. "

    Seriously?

  9. Guest says:

    Er . . . I think I must be missing something here. I'm not sure why Hostess would need a finance department, when its inevitable fate is to end up bankrupt after the private equity types load it up with debt and strip out all the equity?

  10. Unsilent Majority says:

    what were the spreads on Hostess CDS? Will the bond holders get paid out in Twinkies?

  11. Billy, age 10 says:

    The only reason I read this Article was because you put Fruitpie the Magician at the top of it.

  12. Hello there! Quick question that’s entirely off topic. Do you know how to make your site mobile friendly? My website looks weird when browsing from my iphone. I’m trying to find a template or plugin that might be able to resolve this problem. If you have any suggestions, please share. Thanks!

  13. Mark Russo says:

    Good tools. I have used a pair of things on this list even today. We have using Hootsuite for long time. It has lots of advantages.

  14. Kirby Valez says:

    I discovered your blog site on google and check a few of your early posts. Continue to keep up the very good operate. I just additional up your RSS feed to my MSN News Reader. Seeking forward to reading more from you later on!…

  15. Pat Gonyo says:

    An impressive share, I merely with all this onto a colleague who was simply performing a small analysis within this. And then he the fact is bought me breakfast simply because I uncovered it for him.. smile. So well then, i’ll reword that: Thnx to the treat! But yeah Thnkx for spending plenty of time go over this, I’m strongly regarding this and love reading regarding this topic. If possible, as you become expertise, does one mind updating your blog with a lot more details? It truly is highly ideal for me. Massive thumb up in this post!

  16. An impressive share, I merely with all this onto a colleague who was simply performing a small analysis within this. And then he the fact is bought me breakfast simply because I uncovered it for him.. smile. So well then, i’ll reword that: Thnx to the treat! But yeah Thnkx for spending plenty of time go over this, I’m strongly regarding this and love reading regarding this topic. If possible, as you become expertise, does one mind updating your blog with a lot more details? It truly is highly ideal for me. Massive thumb up in this post!

  17. This is very interesting, You’re an excessively skilled blogger. I have joined your feed and stay up for in quest of more of your excellent post. Additionally, I have shared your website in my social networks!

  18. Many thanks for this! It seems like every time I upgrade to a newer edition of iTunes, something goes wrong. In the past I had a challenge where my song names would get cut off whenever they were way too long, but then I was able to retype them back again in without having any difficulty. Of course it was still a difficulty because I didn’t remember the names of every single song that got cut off. Incredibly frustrating. We have also examine that with this newest update a lot of folks are having issues with the font being unreadable, which is pretty annoying as well. -Jason

  19. Drew Sterry says:

    Need to confess that your particular write-up is absolutely attention-grabbing. We have expended a great deal of my spare time on this internet site. Many thanks.

  20. It’s what is called an ‘oxymoron,’ LOL!

  21. Excellent weblog here! Also your site rather a lot up fast! What host are you the use of? Can I get your affiliate website link on your host? I want my net web page loaded up as quickly as yours lol

  22. Nice inputs you came with in this post, for sure a sublect I will think a lot additional about in the close to future.

  23. Hello. Neat article. There is an issue with your website in firefox, and you might want to test this… The browser is the marketplace leader and a good section of other folks will leave out your great writing because of this problem.

  24. website link says:

    With havin so much content and articles do you ever run into any issues of plagorism or copyright infringement? My site has a lot of completely unique content I’ve either written myself or outsourced but it seems a lot of it is popping it up all over the internet without my permission. Do you know any techniques to help protect against content from being ripped off? I’d genuinely appreciate it.

  25. Peachtree Pest Control, servicing Atlanta and the mysterious borage. Their goal is to use pesticides, the good news is that organic pest control. Best Phoenix, Arizona pest control on the vegetables you intend to feed your family at risk. In order to help protect our fragile environment.

  26. home page says:

    Appreciating the time and effort you put into your website and in depth information you offer. It’s awesome to come across a blog every once in a while that isn’t the same unwanted rehashed material. Great read! I’ve bookmarked your site and I’m adding your RSS feeds to my Google account.

  27. Hey there I am so happy I found your weblog, I really found you by accident, while I was searching on Aol for something else, Anyhow I am here now and would just like to say many thanks for a remarkable post and a all round interesting blog (I also love the theme/design), I don’t have time to browse it all at the moment but I have book-marked it and also included your RSS feeds, so when I have time I will be back to read more, Please do keep up the superb work.

  28. Hi there! This is kind of off topic but I need some help from an established blog. Is it hard to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about creating my own but I’m not sure where to begin. Do you have any tips or suggestions? Thanks

  29. read more says:

    I really like your wp theme, exactly where do you down load it from?

  30. linked site says:

    My developer is trying to convince me to move to .net from PHP. I have always disliked the idea because of the expenses. But he’s tryiong none the less. I’ve been using WordPress on several websites for about a year and am anxious about switching to another platform. I have heard excellent things about blogengine.net. Is there a way I can transfer all my wordpress posts into it? Any help would be really appreciated!

  31. Do you mind if I quote a few of your articles as long as I provide credit and sources back to your weblog? My blog site is in the very same area of interest as yours and my users would certainly benefit from a lot of the information you provide here. Please let me know if this ok with you. Thank you!

  32. Just thought you should considered uploading additional videos for your blog posts to hold the visitors more entertained? I necessarily mean I just study via the entire piece of yours and it had been really good but since I am more of the visual learner,I found that it would let me know how it turns out! I appreciate what you guys are always up though.

  33. Shape to ride to work on clear days if you live within a few of the reasons they designed and built their scooter. So, become a part of the electric engine!

  34. Greetings! Quick question that’s completely off topic. Do you know how to make your site mobile friendly? My weblog looks weird when viewing from my iphone 4. I’m trying to find a theme or plugin that might be able to resolve this issue. If you have any suggestions, please share. With thanks!

  35. Hi! This is my first comment here so I just wanted to give a quick shout out and tell you I truly enjoy reading your posts. Can you suggest any other blogs/websites/forums that go over the same subjects? Thanks for your time!

  36. I’m not sure why but this web site is loading extremely slow for me. Is anyone else having this issue or is it a issue on my end? I’ll checκ baсκ later and see if thе problem stіll exists.

  37. Royal Deaver says:

    I as well as my friends appeared to be studying the best helpful hints on your site and then before long developed a horrible feeling I never expressed respect to you for those techniques. These people happened to be for that reason passionate to read through all of them and now have in fact been taking pleasure in those things. Appreciation for actually being indeed considerate and for selecting this kind of good guides most people are really needing to know about. My very own honest apologies for not expressing appreciation to you sooner.

  38. What i do not realize is if truth be told how you’re now not really a lot more smartly-favored than you might be right now. You’re so intelligent. You understand thus significantly in relation to this matter, produced me in my view imagine it from so many numerous angles. Its like men and women aren’t fascinated until it¡¦s something to do with Girl gaga! Your own stuffs great. Always care for it up!

  39. I should affirm, as a lot as I enjoyed reading what you had to articulate, I couldnt help on the contrary spend interest later than a while. Its as proviso you had a fantastic grasp on the subject affair, except you forgot to comprise your us your readers. I don’t know you should imagine concerning this from far added than one angle. Otherwise maybe you shouldnt simplify thus to a great extent. Its outshine if you reflect about what others may have to utter as a replacement for of emphatically departing for a gut reaction to the subject. Weigh up in relation to adjusting your identifiable belief process and openhanded others who may interpret this the benefit of the doubt.

  40. I have seen the trailer to the movie and it really is laughable. It exhibits all of the skill that a community theater group might. To question us to imagine that this silly movie, rather than anti-American hatred will be the cause of such well-timed 9/11 riots is also laughable. This White Property is becoming run by amateurs.

  41. Trying to get ahead to researching excess from you afterward!…

  42. Delorse Ouk says:

    Have you ever thought about including a little bit more than just your articles? I mean, what you say is valuable and everything. But think about if you added some great graphics or videos to give your posts more, “pop”! Your content is excellent but with images and clips, this blog could certainly be one of the most beneficial in its niche. Great blog!

  43. Jan Fiorillo says:

    Get mostly since on to increase your convenience and ease. It offers a piled three-inch higher heel and it is also ideal for most events. Protect these for almost any evening out out and about after you in no way truly feel like donning additional tall higher heel sandals additionally a gown. You’ll be in a position to even now appear sophisticated whilst sporting because of the reality with denims. Get dressed with a natural leather jumper to accomplish the design.

  44. I like what you guys are up too. Such smart work and reporting! Carry on the superb works guys I’ve incorporated you guys to my blogroll. I think it will improve the value of my website :). “Blessed is he who has found his work let him ask no other blessedness.” by Thomas Carlyle.

  45. Hey… is any person likely? The weather might be perfect for spring wine tasting in Bettigen!br /xo Vanessa

  46. Gee, isn’t a parts car a Used car?

  47. A lot of exceptional facts on the following. I found it on google.

  48. It just isn’rt fair to make an aged Hudnut like me drool like that. I witnessed the pickup on the Nashville Tenn national and thought it essentially the most beautiful car at any time.br /I do have got a 48 sedan and 46 pickup

  49. I’d should test with you here. Which isn’t one thing I normally do! I take pleasure in reading a publish that can make individuals think. Additionally, thanks for permitting me to comment!

  50. I was recommended this web site by my cousin. I am not sure whether this post is written by him as no one else know such detailed about my difficulty. You’re amazing! Thanks!

  51. Some samochody legnica really quality blogs on this web page, saved to help bookmarks.

  52. Can’t believe that I didn’t found your website earlier than this. So far, I’ve read through 13 articles and have found them all to be original. I’d like to personally say thanks. I wish that you can continue writing informative posts. I’ve bookmarked this post for later use and added your rss to my list. Thanks.

  53. Nice blog! Is your theme custom made or did you download it from somewhere? A design like yours with a few simple tweeks would really make my blog shine. Please let me know where you got your theme. Bless you

  54. I like this blog very much, Its a real nice place to read and receive info . “The absence of war is not peace.” by Harry S Truman.

  55. Agen SBOBET says:

    A very awesome blog post. We are really grateful for your blog post. You will find a lot of approaches after visiting your post. I was exactly searching for. Thanks for such post and please keep it up. Great work.
    Jasa SEO

  56. Very good information and article. Keep up the good work.

  57. I really liked your content. Thank you

  58. Dyson DC41 says:

    Hey you got some nice content here. Thanks for showing these story

  59. With any new supplement, particularly a weight loss supplement like Garcinia Cambogia, it is essential that consumers do their research before investing,

  60. Mold Man says:

    Thanks – glad I found this as I have been looking for similar info for quite a while. i have bookmarked it for future use.

  61. Nice Post, it was a good read, thanks!

  62. Großartig sehr interessant.

  63. I really love your content. Thank you :-)

  64. Love you blog, Thanks for the great information

  65. streamlife says:

    Das ist eine geniale neue Marketingidee.
    This is a genius new markeitng idea.

  66. Good stuff here. I appreciate it.

  67. Awesome site! Thanks for sharing the great content![youtube 72wx7G2bcoM http://www.youtube.com/watch?v=72wx7G2bcoM youtube]

  68. nail fungus says:

    Thanks for the post – read, enjoyed and bookmarked. Will also be passing it alongto some friends.

  69. goldinfo says:

    I get the points of this article, however some things may not be as appear on the surface. I will do more research.

  70. Great Information, Thanks for sharing with us!

  71. Hey great content my friend… I just love your writing style

  72. I really love your content.. Thank you!

  73. Thank you for providing such great content.

  74. Hiya, I'm really glad I have found this info. Today bloggers publish only about gossip and web stuff and this is actually frustrating. A good web site with exciting content, this is what I need. Thanks for making this website, and I'll be visiting again. Do you do newsletters? I Can not find it.

  75. Great content. Thanks for the information

  76. Wake Up Now says:

    Wake Up Now this is good information from a good site. I hope to be ble to have a site like this one day. Thanks for the info

  77. Everytime great content.Congratulation.

  78. I think, it should be good if i share this post on my facebook nad other social media networks.

  79. Chrissie Mac says:

    Great content. Thanks, will be back.

  80. while net browsing i found this valuable post. I want to share this on my facebook app.

  81. This is a great inspiring post.I am pretty much happy with your good stuff.You put very nice information ..

  82. Your writing taste has been surprised me. Thank you, quite nice post.

  83. You should proceed your writing. I am confident, you've a huge readers' base already!

  84. Your writing taste has been surprised me. Thank you, quite nice post.

  85. You should proceed your writing. I am confident, you've a huge readers' base already!

  86. Thanks, I've just been searching for information approximately this topic for ages and yours is the best I have came upon till now.

  87. But it seems as if they found a way to make a comeback given all the setbacks they had with going bankruptcy and having to sell….Twinkies will never die!

Our Sites

  • Above the Law
  • How Appealing
  • ATL Redline
  • Breaking Defense
  • Breaking Energy
  • Breaking Gov
  • Dealbreaker
  • Fashonista
  •