Twinkies maker Hostess seeks bankruptcy protection
By The Emporia Gazette (Contact), The Associated Press
Wednesday, January 11, 2012
NEW YORK — Hostess Brands Inc., the maker of Twinkies and Wonder Bread, is seeking bankruptcy protection, blaming its pension and medical benefits obligations, increased competition and tough economic conditions.
The filing likely won’t affect Emporia’s Dolly Madison plant, according to Linda Bartley, local representative of the the Bakery and Confectionery Union.
“We hope this means that we will continue to operate and restructure our finances,” Bartley said. “In the beginning stages of it I don’t think it will mean job elimination at this plant. ... This plant here is very profitable, it’s one of the best ones they have, so we’re hopeful that the Emporia plant will continue on.”
The Chapter 11 filing on Wednesday comes just two years after a predecessor company emerged from bankruptcy proceedings.
That company, called Interstate Bakeries and based in Kansas City, Mo., filed for bankruptcy protection in 2004. It emerged in February 2009.
But Hostess said Wednesday that its previous efforts to produce incremental change, including the prior Chapter 11 case, were insufficient.
In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess disclosed that its biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes approximately $944.2 million.
Its second-largest unsecured creditor, Central States, Southeast and Southwest Areas Pension Plan is owed far less, about $11.8 million.
Hostess President and CEO Brian Driscoll said in a statement that the company is working to reach a consensual agreement with its unions to modify its collective bargaining agreements. The company said that its current cost structure is not competitive mostly because of legacy pension and medical benefit obligations and restrictive work rules.
Hostess said those issues, coupled with more competition and the difficult economic conditions, created a worsening liquidity situation that drove its need to reorganize.
In its bankruptcy filing, Hostess also listed its estimated assets between $500 million and $1 billion and its estimated liabilities at more than $1 billion.
The privately held Irving, Texas-based company said that it will be able to maintain routine operations thanks to a $75 million financing commitment from a group of lenders led by Silver Point Capital LP.
Reports had surfaced earlier in the week that the bakery company was planning to make such a filing.
Hostess said that it will look to restructure into a “strong, competitive” company. It will continue to run bakeries, outlet stores and distribution centers and deliver its goods during the process. The company said that it does not anticipate any disruptions in the making of or delivery of its breads or cake products and reassured that its popular brands, which also include Drake’s, Ding Dongs and Ho Hos, will still be available.
Hostess said that it is looking to “create a sustainable cost structure with competitive employee benefit plans.” It also hopes to modernize its systems, fleets and plants to keep pace with customer needs.
“This company has tremendous potential if we can remove the barriers to success,” Driscoll said.
Hostess has about 19,000 employees and operates in 49 states. Annual sales are about $2 billion, according to the company’s website.
Steve_Corbin (anonymous) says...
Another potential hit on our economy. Let's all pray that Linda Bartley is correct and it won't affect The Emporia plant. I have too many friends working there and want to see them to continue to do so.
January 11, 2012 at 4:42 p.m. ( permalink | suggest removal )
create (anonymous) says...
"In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess disclosed that its biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes approximately $944.2 million."
Ay, there's the rub, and a mighty big one at that. Is Hostess trying to get out of its responsibility to the pension fund?
January 12, 2012 at 7:04 a.m. ( permalink | suggest removal )
thrashed (anonymous) says...
Create: Sounds like it.
January 12, 2012 at 8:15 a.m. ( permalink | suggest removal )
railroadhorn (anonymous) says...
I don't foresee good things in this - there's just no big market for Ding Dongs and Twinkies and owing nearly a billion to pensions is a sure way to go out of business, then reorganize on a smaller basis.
January 12, 2012 at 9:16 a.m. ( permalink | suggest removal )
methusla (anonymous) says...
It would seem -- to me that is-- pension funds, the Social Security trust fund, et al, exist to be pillaged, robbed or " borrowed from ? Never to be paid back or made whole/solvent by those who borrowed, pillaged or just plain stole from them !!
But, alas, it has been done and allowed to happen for a long time now.
Even our elected leaders are not above pillaging these funds .
JMO
January 12, 2012 at 9:40 a.m. ( permalink | suggest removal )
railroadhorn (anonymous) says...
Oh, and this is probably going to be a case of the pension benefits being taken over by PBGC anyway....(pension benefit guaranty corp.) so make way for the feds!
January 12, 2012 at 9:47 a.m. ( permalink | suggest removal )
Richie (anonymous) says...
Might I recommend Hostess take a different path? How about offering healthy, nutirional foods?
Hostess Nutritional Information:
http://www.livestrong.com/thedailypla...
Obesity Trends Among U.S. Adults:
http://www.ncsl.org/default.aspx?tabi...
January 12, 2012 at 2:23 p.m. ( permalink | suggest removal )
goodoleboy (anonymous) says...
Richie,
I understand you point of view, but for me there is nothing better than busting my ass in the gym so if I want to have a cupcake or zinger I can.
Hostess is not the problem, people are the problem.
January 12, 2012 at 5:38 p.m. ( permalink | suggest removal )
Richie (anonymous) says...
@Goodoleboy - Point taken, and I agree. But, society needs both proper diet and exercise to decrease the alarming obesity rates.
My point, which I should have clarified, is Hostess would be more profitable if it focused upon healthy choices.
January 12, 2012 at 7:43 p.m. ( permalink | suggest removal )
goodoleboy (anonymous) says...
I see your point, a healthy twinkie would be amazing
January 12, 2012 at 9:26 p.m. ( permalink | suggest removal )
neighbor (anonymous) says...
Would they be called "Dinkies" then?
January 13, 2012 at 1:02 a.m. ( permalink | suggest removal )