Regardless of how or whether Hostess Brands will be liquidated, the dance between investors and the renegotiation of employee compensation is in line with trends that already put taxpayers at risk of assuming PBGC claims.
Hedge funds like
Silver Point Capital
Paulson & Co.
emerged from Delphi's 2009 bankruptcy exit as the company's largest investors. For is part, Delphi emerged as PBGC's second largest claim, with a $6.38 billion pension liability.
remains a top Friendly's investor, after the company's late 2011 bankruptcy put pension claims onto PBGC's books and the buyout firm re-acquired the company in a bankruptcy court. At Eddie Bauer, the story is similar.
Some investors like Wilbur Ross of WL Ross & Co. even appear to have made a career of buying up companies that have saddled PBGC with billions in claims.
In the steel industry, Ross took control of the likes of
during their bankruptcies in the early 2000's amid a U.S. industry downturn, and was able to score investment returns after both companies let billions in pension claims run onto PBGC's balance sheet.
New York Magazine
illustrates how Ross structured the bargain basement steel industry buyouts to see a financial reward, while both companies remain among the five biggest PBGC claimants.
During an election year appraisal of
buyout investments under Mitt Romney,
how the buyout firm wrenched out gains by socializing pension claims of companies like
, another failed steel company.
PBGC also stepped up to sweeten investments during the financial crisis. Failed Californian lender
, bought by a consortium of private equity firms including
Dune Capital Management
J.C. Flowers & Co.
, is a large PBGC claimant and its owners are poised to reap big gains in their FDIC-assisted investment
Meanwhile, in the auto bailout, Chrysler's hedge fund owner
Cerberus Capital Management
retained some equity in the company's businesses, which nearly
most of total losses in the failed investment. Much of Chrysler and
(GM - Get Report)
post-bankruptcy ascendance can be attributed to the evisceration of billions in pension liability brokered by the government.
Media reports indicate Hostess brands may also
find a corporate buyer
from the likes of
(CAG - Get Report)
or Mexican conglomerate
, among scores of potential bidders, and the company's CEO is confident of individual asset sales.
Amid a potential feeding frenzy for the snacks brands of Hostess, taxpayers may be the only ones fed losses by way of prospective PBGC claims.
-- Written by Antoine Gara in New York