'Hostess Twinkie' Investors Involved in Other Iconic American Brands

By Bristol Voss  NOV 16, 2012 5:39 PM

A brief look at the investments of Ripplewood Holdings and Silver Point Capital.


MINYANVILLE ORIGINAL The Hostess Brands demise will be analyzed quite a bit in the coming days, but what’s also interesting is what the former Interstate Bakeries Corp has in common with some other household names including Maytag, Whirlpoool (NYSE:WHR) Readers Digest, Lillian Vernon, Shaklee, Krispy Creme (NYSE:KKD), and Moneygram (NYSE:MGI).

At one time or another, they have all been handed a lifeline by Ripplewood Holdings and/or Silver Point Capital. Of course, many times that lifeline does not include continuing as publicly-traded stand-alone businesses, but such are the tradeoffs. Maytag continues now as part of Whirlpool.

Ripplewood, founded in 1995 by Timothy C. Collins and Silver Point, founded in 2002 by Edward A. Mule and Robert J. O’Shea, are both investment firms that specialize in so-called special situations, also known as distressed, opportunity, or credit investing. In short: They lend money to companies at or near the end of their present financial ropes typically, but not always, entering the Chapter 11 process. When they come in as a “routine” beneficial owner, it is usually with an activist bent.

The two firms came to have control over the Kansas City-based Wonder Bread purveyor following the Chapter 11 model. Ripplewood was the lead investor who provided cash and convertible debt in exchange for a majority stake in the Interstate Bakeries Corp, the previous incarnation of Hostess, during a 2009 court-approved reorganization plan. Financing came from Silver Point and a revolving loan came from General Electric Capital. The wholesale baker underwent another restructuring in January 2012. (The company had first filed for Chapter 11 protection in September 2004.) Previous shareholders got nothing for the delisted stock they held, but the world got Twinkies.

And, despite current reports about boxes of the childhood confection going for $200 on Ebay (NASDAQ:EBAY), the world will have Twinkies, Ding-Dongs, and Wonder Bread again. As new Minyanville contributor Dave Maney writes, “Dry your crème-puffed eyes, my friends. The spongy confections with all the qualities of tasty blown-in foam insulation will almost certainly not disappear from store shelves for very long, if at all.”

In Hostess and the GM Bailout: Why the Chevy Volt Shouldn’t Exist but Twinkies Still Will, Maney explains that, "the economics of selling Twinkies work fine. It’s the economics of making them that has failed." This pattern has been repeated thousands of times, think Converse (NYSE:NKE) and Schwinn (PINK:DIIBF).

Ripplewood has invested in icons like Lillian Vernon, Reader’s Digest, Maytag, and Whirlpool. Other investments include Shaklee Corporation, Refco, and former Royal Dutch Shell (NYSE:RDS.A) division, Kraton Polymers.

Silver Point’s investment choices include Kripsy Kreme, Moneygram and Herbst Gaming, Dana Holdings, Torch Energy Royalty Trust, Cooper-Standard Holdings, FiberMark.

Silver Point also has a communications bent, with investments in Sage Telecom and two TV station groups, Granite Broadcasting and Communications Corporate of America which it acquired following a bankruptcy.

As a side note, the last time the Twinkie maker filed for Chapter 11, possible purchasers included Kraft (NASDAQ:KFT) and PepsiCo (NYSE:PEP). Before splitting itself, Kraft brought in John Cahill, a former partner of Ripplewood to be an executive chairman. Cahill’s other previous positions included chairman and CEO of Pepsico when the corporation separated from its Bottling Group (the two have since reunited).
No positions in stocks mentioned.