The death of Twinkies? Hostess plans to go out of business

A box of Hostess Twinkies is pictured in this undated handout photo.

Hostess Brands Inc, the bankrupt maker of Twinkies and Wonder Bread, said it had sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.

Hostess, which has about $2.5 billion in sales from a long list of iconic consumer brands of snack cakes and breads, said it had suspended operations at all of its 33 plants around the United States as it moves to start liquidating assets.

“We’ll be selling the brands and as much of the infrastructure as we can,” said company spokesman Lance Ignon. “There is value in the brands.”

Hostess said a strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that began last week had crippled its ability to produce and deliver products at several facilities, and it had no choice but to give up its effort to emerge intact from bankruptcy court.

The Irving, Texas-based company said the liquidation would mean that most of its 18,500 employees would lose their jobs.

Hostess had given employee a deadline to return to work on Thursday, but the union held firm, saying it had already given far more in concessions than workers could bear and that it would not bend further. Union officials blamed mismanagement for the company’s woes.

The company, which filed for bankruptcy in January for the second time since 2004, said it had filed a motion with U.S. Bankruptcy Judge Robert Drain in White Plains, New York, for permission to shut down and sell assets.

Hostess has 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Its brands include Wonder, Nature’s Pride, Dolly Madison, Drake’s, Butternut, Home Pride and Merita, but it is probably best known for Twinkies – basically a cream-filled sponge cake.

“We do not have the financial resources to weather an extended nationwide strike,” Chief Executive Officer Gregory Rayburn said in a statement. “Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”

The company said in court filings that it would probably take about a year to wind down. It will need about 3,200 employees to start that process, but only about 200 after the first few months.

Union President Frank Hurt said the company’s failure was not the fault of the union but the “result of nearly a decade of financial and operational mismanagement” and that management was trying to make union workers the scapegoats for a plan by Wall Street investors to sell Hostess.

Hostess said its debtor-in-possession lenders had agreed to allow it to retain access to $75 million to fund the wind-down process.

The company has canceled all orders with its suppliers and said any product in transit would be returned to the shipper.

In its filing with the court, the company said it would have incurred a loss of between $7.5 million and $9.5 million from November 9 to November 19 in lost sales and increased costs.

“These losses and other factors, including increased vendor payment terms contraction, have resulted in a significant weakening of the debtors’ cash position and, if continued, would soon result in the debtors completely running out of cash,” it said.

Hostess had already reached an agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union.

In its January bankruptcy filing, Hostess listed assets of $981.6 million. In a February filing, it assessed the value of its patents, copyrights and other intellectual property at some $134.6 million, although it did not break down the value by brands.

The company’s last operating report, filed with the bankruptcy court in late October, listed a net loss of $15.1 million for the four weeks that ended in late September, mostly due to restructuring charges and other expenses.


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