Twinkies maker Hostess Brands files for bankruptcy protection
Hostess Bankruptcy - Hostess filing for bankruptcy again? There are reports that Hostess, the maker of Twinkies, could be headed back to bankruptcy court. According to sources, the company is more than $860 million in debt. The company bounced back from its first round of bankruptcy in 2009.
The Chapter 11 filing comes just two years after a predecessor company emerged from bankruptcy proceedings. Hostess blamed the current move on troubles with its pension and medical benefits obligations, increased competition and tough economic conditions.
The company's other problem is that health-conscious Americans favor yogurt and energy bars over the dessert cakes and white bread they devoured 30 years ago.
Consumption of healthy snacks is growing, too. About 32 percent of Americans ate yogurt at least once in two weeks in 2011, for instance, up from 18 percent in 2000.
"We're less likely to be snacking on items that we shouldn't be snacking on," said Harry Balzer, chief industry analyst for The NPD Group, a consumer marketing research firm.
Hostess, which is a privately held, doesn't disclose sales figures. But analysts say the iconic brand has been hurt by Americans' changing eating habits.
To be sure, Hostess' snacks don't neatly fit into the U.S. trend toward a healthier lifestyle that includes a diet rich in whole wheat foods, fruits and vegetables.
The Twinkies fans out there shouldn't fret, however. The privately held Irving, Texas bakery company says it will be able to maintain routine operations to keep shelves stocked with the spongy, yellow snack and other Hostess pasteries thanks to a $75 million financing commitment from a group of lenders.
Reports had surfaced earlier in the week that the company was planning to make a bankruptcy 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.
Hostess, founded in 1930, operates about 36 bakeries in the U.S. and employs about 19,000 people, a majority of whom are members of 12 unions.
The company listed the Bakery & Confectionery Union & Industry International Pension Fund, to which it owes $944.2 million, as its largest unsecured creditor.
To reorganize itself, the company must withdraw from multiemployer pension plans, address legacy health and welfare costs and secure new capital to modernize its production and distribution operations, Irving, Texas-based Hostess said.
The privately held company said it had made efforts to sell its businesses and other M&A alternatives, including reaching out to companies like Smuckers, Kraft, Blackrock, KKR and others without any success.
"We remain hopeful that we can reach an agreement that will allow us to amend our labor contracts so that we can emerge from Chapter 11 as a highly competitive company that provides secure jobs for our employees," Chief Executive Brian Driscoll said in a statement.