By now you’ve likely heard that Hostess, the maker of such iconic snack cakes as Twinkies and Ho Hos, has filed for Chapter 7 bankruptcy. But before you go out and clear the shelves of your favorite treat, a closer look at what is going on with the embattled company is in order.
Hostess is actually owned by the company Hostess Brands, Inc., which also owns the Wonder Bread, Nature’s Pride, Dolly Madison, Butternut Breads, and Drake’s brands. Its financial troubles began in 2004, when it filed for Chapter 11 bankruptcy and emerged from bankruptcy in 2009. Late last year, Hostess was on the verge of filing bankruptcy again due to financial problems, and had stopped paying future pension benefits breaking its contracts with labor unions.
In January of this year, Hostess filed again for Chapter 11 bankruptcy, stating in its filing that “is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules.” The company also stated that it employed more than 19,000 people and carried more than $860 million in debt.
An apparent deal between the Union and Hostess fell through in July of last summer, and Hostess employees went on strike in November 2012, after Hostess’s latest contract proposal was rejected by 92 percent of union members.
Hostess announced plans to cease operations on November 16th, 2012 and that it was laying off all of its employees. In a last ditch effort to save the company, U.S. Bankruptcy Court Judge Robert Drain ordered the company to enter mediation on November 19th. The following day it became clear that the mediation had failed, and on the 21st Hostess was given approval to begin to wind-down business.
Fortunately for consumers, the most observers seem to think that the Hostess products will likely survive the liquidation. The Hostess brand has tremendous amount of cultural goodwill and capital, and Hostess has said that is has received interest from potential buyers.
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