Hostess Brands Inc., in the midst of winding down its business, won approval Thursday from a federal bankruptcy judge to give as much as $1.75 million in bonuses to its executives.
The money is intended as an incentive for 19 top-level managers to remain with the Twinkies and Ding Dongs maker to oversee its liquidation.
The payouts will be granted only if managers "achieve a set of specific tasks and goals within a specified time frame that are designed to speed and lower the cost of the wind-down," Hostess spokesman Lance Ignon said.
The maximum bonus amount, Ignon said, represents 0.07% of Hostess' revenue and 0.17% of the value of its assets and is below the average for bonuses in comparable bankruptcy cases. Hostess Chief Executive Greg Rayburn would be not be eligible for a bonus, Ignon said.
U.S. Bankruptcy Judge Robert Drain in White Plains, N.Y., also agreed Thursday to grant final approval for Hostess to sell its cult-favorite brands and shut down its operations for good. The company filed for bankruptcy after a battle with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. The union accused the company of slashing wages and benefits while bumping up executive pay.
Last week, Drain gave interim approval to the liquidation, which is expected to take about a year. Hostess' closure would result in more than 18,000 workers losing their jobs.
Hostess has received interest from a wide group of bidders, including Hurst Capital, a Florida investment firm that has made an offer. Also reportedly interested are Grupo Bimbo, which owns Sara Lee and Entenmann's, and C. Dean Metropoulos & Co., which owns the maker of Pabst Blue Ribbon beer.
The company is now "in active dialogue with 110 potential bidders, 70 of which have signed nondisclosure agreements," Ignon said. The baker's investment bankers received 10 calls Wednesday alone.
Hostess, which stopped contributing to its pension plans last year, also told the court that it needed to stop paying $1.1 million a month in retiree benefits.
The 82-year-old pastry maker entered bankruptcy for the second time in a decade in January. The Irving, Texas, company said this month that it could no longer function after a nationwide strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.
The union joined a workers' pension fund earlier this week to ask Drain to hand over control of the liquidation process to a Chapter 11 trustee.
They accused Hostess' management of being "woefully unsuccessful in its reorganization attempts" and said a trustee would best protect creditor interests and "support an orderly and timely wind-down."