U.S. Department of Justice, Airgas, Alternative Investment Group, American Century, America’s Health Insurance Plans, ApexBrasil, Association for Corporate Growth, Bank of America, Bank of New York Mellon, Barclays Services Corporation, BNP Paribas, Capital Research, Citigroup, Deutsche Bank, Fidelity, Franklin Resources, Freddie Mac, Goldman Sachs, Intel, JP Morgan Chase, Microsoft, National Rural Utilities Cooperative Finance Corporation, NMS Group, Oracle, Pension Real Estate Association, Real Estate Roundtable, Reynolds American, Royal Bank of Scotland, Visa, Wells Fargo, Nomura Holdings America, Laurus Funds, Ripplewood Holdings
Perhaps one of the most interesting aspects of the just announced Hostess liquidation, one that will be largely debated and discussed in the media, or maybe not at all, is the curious cast of characters and the peculiar history of this particular bankruptcy. Some may not be aware that the company's Chapter 11 (or colloquially known as 22) bankruptcy filing this January, which today became a Chapter 7 liquidation, was the second one in the company's recent history, with Hostess, previously Interstate Bakeries, emerging from its previous protracted multi-year bankruptcy in 2009. What is curious is that its emergence had all the drama of a anti-Mitt Romney PAC funded thriller, with a PE firm, in this case Ripplewood holdings, injecting $130 million in order to obtain equity control of Hostess as it was emerging last time. There were also more hedge funds, investment banks, strategic buyers, politicians involved in this particular story than one can shake a deep fried numismatic value Twinkie at. More importantly, however, as America has been habituated following the last season of the reality TV show known as the presidential election, if Private Equity then "bad." Only this time there is a twist: because it wasn't really PE that was the pure evil in the Obama long-term campaign, it was associating PE with Republicans, and thus: with jobs outsourcing. And here comes the Hostess twist: because Tim Collins of Ripplewood, was a prominent Democrat, a position which allowed him to get involved in the first bankruptcy process in the first place, due to his proximity with the Teamsters' long-term heartthrob Dick Gephardt (whose consulting group just happens to also be an equity owner of Hostess). In other words, the traditional republican-cum-PE scapegoating strategy here will be a tough one to pull off since the narrative collapses when considering that it was a Democrat who rescued the firm, only to see it implode in a trainwreck that has resulted in the liquidation of a legendary brand, and 18,500 layoffs.
We think it would be somewhat aggressive to suggest that an "in kind" distribution to limited partners by an LBO fund is necessarily indicative of a meltdown in the buyout shop- but only somewhat aggressive. As aggressive as pancreatic cancer? We're not sure. (And since it is the New York Post that is reporting on Bernie's demise, we're not so sure about that either).