Ripplewood, which was founded by Timothy C. Collins, a major Democratic donor, is expected to lose most, if not all, of the $130 million or so it invested in Hostess. The company’s lenders, led by Silver Point Capital and Monarch Alternative Capital, are not expected to fare well either.
The behind-the-scenes tale of Hostess and Ripplewood may be the opposite of a project to buy it, strip it and flip it. When Mr. Collins originally looked at Hostess, he was trying to make investments in troubled companies with union workers. He was convinced that he could work with labor organizations to turn around iconic American businesses, and he hoped Hostess would become a model for similar deals.
Early on, Mr. Collins sought out
Richard A. Gephardt, the former House majority leader, who had become a consultant on labor issues, to help Ripplewood acquire Hostess and work with its unions. Mr. Collins had previously been a donor to Mr. Gephardt’s election campaigns, according to an article in Fortune magazine this year that described the relationship.
It was Mr. Collins’s relationship with Mr. Gephardt — a Democrat and longtime friend of labor — that helped make the deal happen in the first place.
While Ripplewood sought significant concessions from the unions in 2009, some insiders and outside analysts privately suggested that Ripplewood did not fight hard enough for even greater givebacks from the unions in the bankruptcy process — savings worth $110 million — perhaps as a function of Mr. Collins’s relationship with Mr. Gephardt. In addition, the company was saddled with $670 million in debt, which had jumped by about $200 million as part of the sale during bankruptcy.