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Twinkies’ Maker Files For Bankruptcy: End Of The Road?

This is not the first time such a question is asked by the media. However, this time for Twinkies’ maker it might just be the end of the road if we take into account it is filing for bankruptcy just three years after completing an earlier restructuring.

In February 2009, Twinkies’ snack cakes and Wonder bread’s maker, Hostess Brands was coming to the end of a five years bankruptcy protection. It had filed for it in 2004 on account of low sales and high fixed costs. The restructuring seem not have been enough, as Hostess Brands itself states and it is now filing for another one.

On Wednesday, Hostess President and CEO Brian Driscoll said that previous efforts to reinforce the company, as well as the prior Chapter 11 filing, were not enough. Driscoll said that the company’s current cost structure is not competitive and blames the legacy pension, medical benefit obligations and restrictive work rules for that.

Seemingly, the company pays its employees about $63.2 million per pay period and it is already owing them $21 million for services rendered. As a result, Hostess Brands it is filing with the U.S. Bankruptcy Court for the Southern District of New York.

The Wall Street Journal writes that the company owes its biggest unsecured creditor Bakery & Confectionary Union & Industry International Pension Fund approximately $944.2 million. The second largest unsecured creditor of the company is Central States, Southeast and Southwest Areas Pension Plan to whom it owes about $11.8 million.

Same publication writes that “Hostess’s filing would mark what is known as a Chapter 22 proceeding in restructuring circles, since the company had already sought bankruptcy protection once before”.

Although so far there is no news whether more employees will lose their jobs or whether the company will stop the production of the Twinkies, CupCakes and Sno Balls, the bankruptcy filing stated: “The employees have been witness to the closing or sale of several operations within the debtors’ business as well as company-wide layoffs of reductions in force”. That coupled with “increase pressures”, “layoffs and general concern about the welfare of the debtors, have led to a decline in employee morale”.

According to the company’s website, Hostess Brands employs about 19,000 workers and operates in 49 states under several subsidiaries.

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Eli Wads is one of our expert authors in technology and business fields.Currently living in San Marino, Eli has graduated at Southwestern Academy with a Bachelor Degree in business in 2008. Contact him by dropping him an e-mail at Eli.Wads@dailygossip.org

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