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Farewell, Twinkies

qayak said:
Here's an article from Fortune magazine explaining it all.

http://www.examiner.com/article/the-real-reasons-hostess-went-bankrupt
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I don't see anything about lenders in that article at all. I've read all the articles in this thread (and several in the Bain Capital thread) and I still don't understand how Goldman Sachs or whatever investment bank is going to get their money back and how they benefit from lending money to private equity firms to buy failing businesses, saddle them with the loan repayment, then drive them into bankruptcy. I understand that this could happen now and then but how can this work as a profitable, successful business model for the lender or private equity? There's this idea of vulture capitalists who do this for a living and I don't get it. I understand there could be a lot of short term gain for some executives at the failing company and for the PE firm but how can this be a sustainable relationship between PE and the lender? Pretend that I'm a slobbering idiot wearing pampers and a helmet and my parents have to walk me on a leash even though I'm in my 30's. Please walk me through it.
 
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balrog666 said:
Because the company is already failing! You have to reverse that and then achieve profitability with the employees that are still left there (i.e., those that haven't left for greener [or more stable or secure] pastures already - think about that for a minute -- just who do you think is left working at a company that has been failing for the last 15 years?).

What "qualified" individual, or management team, is going to want to jump in there and do what needs to be done without up-front compensation?

;)
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I would and quite a few people I know would as well. And indeed I and 2 colleagues did that about 8 years ago, turned around a 160 million loss into a over a million profit in just under 14 months. If we hadn't done that we would have just received our monthly salaries, our bonuses were entirely contingent on us stemming the incredible losses and a return to profitability.

Why any shareholder would be willing to employ someone to "turn around" a company who was not willing to be only "handsomely" rewarded on achieving the desired results is beyond me.
 
RecoveringYuppy said:
Heaven forbid they might try something that has worked for successful companies.
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The exampole in the Wikipedia article is Oracle founder and CEO Larry Ellison and his $1 salary. Oh and his $77 million in stock options.

Do you think that's an appropriate model for a bankrupt company? How many qualified applicants do you think will respond to a "CEO wanted" ad, salary $1?

RecoveringYuppy said:
Care to explain how what they did helped?
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So your position is that they should have let it go out of business in 2004, since it was beyond help?
 
Scopedog said:
I don't see anything about lenders in that article at all. I've read all the articles in this thread (and several in the Bain Capital thread) and I still don't understand how Goldman Sachs or whatever investment bank is going to get their money back and how they benefit from lending money to private equity firms to buy failing businesses, saddle them with the loan repayment, then drive them into bankruptcy. I understand that this could happen now and then but how can this work as a profitable, successful business model for the lender or private equity? There's this idea of vulture capitalists who do this for a living and I don't get it. I understand there could be a lot of short term gain for some executives at the failing company and for the PE firm but how can this be a sustainable relationship between PE and the lender? Pretend that I'm a slobbering idiot wearing pampers and a helmet and my parents have to walk me on a leash even though I'm in my 30's. Please walk me through it.
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Step 3 is sooper sekrit, good luck getting an answer.
 
Darat said:
I would and quite a few people I know would as well. And indeed I and 2 colleagues did that about 8 years ago, turned around a 160 million loss into a over a million profit in just under 14 months. If we hadn't done that we would have just received our monthly salaries, our bonuses were entirely contingent on us stemming the incredible losses and a return to profitability.

Why any shareholder would be willing to employ someone to "turn around" a company who was not willing to be only "handsomely" rewarded on achieving the desired results is beyond me.
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Did you have control over who you could hire and fire? Which plants you could close? Etc etc.
 
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WildCat said:
And now he has no job.
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But he does have somewhere upwards of 2 million dollars. It doesn't seem to me that the shareholders got their money's worth.

WildCat said:
So your position is that they should have let it go out of business in 2004, since it was beyond help?
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I can't speak for him, but my position is that either it was beyond help, or it wasn't beyond help, and they picked a bad person to run it.


One of the things I don't get is how anyone can actually blame anyone other than the CEO. The point of being CEO is that you're in charge, and you don't get the chance to blame someone else, even if it happens to be someone else's fault. Did the unions kill Hostess? Then obviously they had the wrong guy negotiating with the unions. Was it competition? Obviously, he was unable to react quickly enough. Little Debbie is still in business. Hostess is not. Someone did something right, and someone at Hostess did something wrong. Regardless of the identity of the "someone", it's still the CEO, ultimately. If that company was not doomed to failure, it was his job to make it succeed, and it didn't. If it was doomed to failure, then one must question the ethics of someone who accepts two million dollars for a service he knows is not going to be successful. If it was doomed to failure, but he didn't realize it, then he gets a pass on the ethics, but he's clearly incompetent.
 
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Meadmaker said:
But he does have somewhere upwards of 2 million dollars. It doesn't seem to me that the shareholders got their money's worth.
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The shareholders were the private equity firm that hired him, it's a private company. They lost hundreds of millions of dollars.

Should have closed in 2004, yes?
 
WildCat said:
The shareholders were the private equity firm that hired him, it's a private company. They lost hundreds of millions of dollars.

Should have closed in 2004, yes?
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So it would seem. Certainly the people who were hired to turn it around couldn't do it.
 
RecoveringYuppy said:
Are you just going to continue to make things up or do you have something to add to the conversation?
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You realize the company filed for bankruptcy protection in 2004, yes?

And that it survived until 2012 because of the actions the Hostess critics here are criticizing?
 
Meadmaker said:
So it would seem. Certainly the people who were hired to turn it around couldn't do it.
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Do you agree with the claims by others in this thread that all the efforts made since the 2004 bankruptcy were solely to give the 9 top execs raises? That the private equity firm that owned it dumped hundreds of millions into the company, and lost it, just to bump the pay of those 9 execs by $5 million or so and screw the union workers just for ***** and giggles?
 
WildCat said:
Do you agree with the claims by others in this thread that all the efforts made since the 2004 bankruptcy were solely to give the 9 top execs raises? That the private equity firm that owned it dumped hundreds of millions into the company, and lost it, just to bump the pay of those 9 execs by $5 million or so and screw the union workers just for ***** and giggles?
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It's difficult to say exactly what the plan was.

Certainly one thing that does happen is that people invent ways to find suckers to invest in a hopeless enterprise just so they can skim some of that investment money into their own pockets. That's not at all unusual.

One other thing that's equally certain is that some people who oversaw this company made themselves very rich during the course of driving this company to oblivion.

So, did they do that on purpose? Did they know that the investor dollars that were making them rich would never produce a return? I'm guessing that they would insist that they knew no such thing.


You make it sound like the private equity firm was spending its own money on this. Not true. The person who managed that account was going to get rich either way. He was spending investor dollars, and skimming some for himself. Certainly a winning investment is a better career move than a losing investment, but no one at those equity firms goes home hungry.

Regardless, the management of the firm was either inept or corrupt. Figuring out which one would take a better accountant than I.
 
Darat said:
I would and quite a few people I know would as well. And indeed I and 2 colleagues did that about 8 years ago, turned around a 160 million loss into a over a million profit in just under 14 months. If we hadn't done that we would have just received our monthly salaries, our bonuses were entirely contingent on us stemming the incredible losses and a return to profitability.

Why any shareholder would be willing to employ someone to "turn around" a company who was not willing to be only "handsomely" rewarded on achieving the desired results is beyond me.
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So what did you say when Hostess called you to deal with their union pension and healthcare cost problems for $1 per year? Is this debacle all your fault for saying "no"??



;)
 
WildCat said:
You realize the company filed for bankruptcy protection in 2004, yes?

And that it survived until 2012 because of the actions the Hostess critics here are criticizing?
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No! :rolleyes:

They filed for bankruptcy in 2004, it took 5 years to broker a restructuring deal. They emerged from bankruptcy in 2009 with 50% more debt and lower sales than when they went into it.

That's not a turn around or even holding its own.

They filed for bankruptcy again in 2011 with an even higher debt and lower sales.
 
If two parties enter into a contract, say an employer and an employee, why shouldn't they have to abide by that contract? If an employer sits down at a table with a labor union and makes a contract that they both agree on, why is that a problem later? If the company is in serious financial trouble shouldn't they say "we can't give you what you're asking for, you'll have to walk?" I just don't understand why all the blame falls on one side. You might as well blame the suppliers of raw materials for charging too much.
 
qayak said:
No! :rolleyes:

They filed for bankruptcy in 2004, it took 5 years to broker a restructuring deal. They emerged from bankruptcy in 2009 with 50% more debt and lower sales than when they went into it.

That's not a turn around or even holding its own.

They filed for bankruptcy again in 2011 with an even higher debt and lower sales.
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I'll put this as simple as I can: If those things hadn't been done the company would have died in 2004.

To reject what was done since is to say it should have been allowed to die in 2004. I have a feeling some people in this thread believe if a private equity firm hadn't got involved all those union workers would still be making their $45K salaries, their pensions would be fully funded, they'd have cadillac health insurance, and ponies that **** Twinkies.
 
sopclod said:
If two parties enter into a contract, say an employer and an employee, why shouldn't they have to abide by that contract? If an employer sits down at a table with a labor union and makes a contract that they both agree on, why is that a problem later? If the company is in serious financial trouble shouldn't they say "we can't give you what you're asking for, you'll have to walk?" I just don't understand why all the blame falls on one side. You might as well blame the suppliers of raw materials for charging too much.
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I'm pretty sure federal labor laws prevent them from firing workers and hiring replacements at lower wages. And even if they did they'd still be on the hook for the former worker's pensions.
 
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