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January 11, 2012 in Nation/World
Twinkies maker Hostess seeks bankruptcy protection
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 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.
© Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Salmonella linked to chicken handling 
Bruce (aka thatoneguy) on January 11 at 9:22 a.m.
“…blaming its pension and medical benefits obligations, increased competition and tough economic conditions. ”
Well, they certainly can’t blame the cost of using quality ingredients…
liberal_in_right_wing_land on January 11 at 9:53 a.m.
They are legally allowed to call this garbage they put out bread and cakes? Gross.
Sounds like another company thats going to be moving its operations to another country were they can pay their employees 10 cents a day.
Northern_kid on January 11 at 10:02 a.m.
I think their problems stem more from their products than anything else. I can’t remember the last time I ate one of their products. I’d be more inclined to recommend Wonder Bread for oil spill clean-ups than consuming it.
gb333 on January 11 at 10:22 a.m.
A billion dollars owed is a lot of money for most of us. But this is a major corp, that has been around for a long time.
I am wondering. What kind of perks have the CEO’s and upper management gotten over the last ten years?
I mean, if they saw this coming, did they still give themselves million dollar bonuses? Or even spend millions recklessly but under the guise of corporate expense? Could a billion dollars over 10 years been funneled into what they owe?
I would like to know this, because it would negate the argument that pension costs are the reason they have to file.
If hostess has made good choices, and it really is just a bad economy then fine. Sometimes you have to cut costs to stay alive. Better to do that then go under and lay everyone off. But if its really just a power play so that they can undermine their workers and send more to the bottom line… Just something I see a lot of lately. Record profits, kick backs to worthless CEO’s, and more layoffs or cuts to pay to employees..
The_Seer on January 11 at 10:23 a.m.
Woe is me!
Where will I get my daily dose of whipped lard disguised in the euphemism of “cream filling?”
Just another example of a U.S. corporation being let off the hook for contracted obligations to their workers by the U.S. “Justice” system.
mtharves on January 11 at 10:28 a.m.
And what about RJ and Hammy (“Over the Hedge”, for the uninformed)? How can you expect them to go with out Twinkies!
Notapatriot on January 11 at 11:15 a.m.
Unions - again the death knell of American Commerce. Factories likely manned by $25+ an hour employees with 100% everything benefits and massive retirement benefits doing jobs that are surely minimum wage positions at best. Bankruptcy then emerge non-union. That’s the only answer. That’s what GM and the rest of the Auto Industry should have done.
Bruce (aka thatoneguy) on January 11 at 11:21 a.m.
Liberal — with the amount of preservatives they use, they could easily have their products made in China and shipped here with plenty of time before the “sell by” date.
Seer — lard is expensive. I’m sure Dow Chemical has something cheaper.
Notapatriot — Yes! Living wage jobs are the downfall of this country and should be eradicated.
liberal_in_right_wing_land on January 11 at 11:29 a.m.
Notapatriot,
Don’t be mad because you work at Wal Mart for 25 hours a week on minimum wage with no benefits. Instead of being mad at people with a better job and better benefits, maybe you should strive to join them, better educate yourself to get a better paying job and move up from being a door greeter at Wally World.
pmbrown49 on January 11 at 12:04 p.m.
I blame that corporate raider Twinkie the Kid who is now over at Keebler verbally and sexually harrassing the Elves.
WHS on January 11 at 12:37 p.m.
Notapatriot, the average wage for Hostess employees is $16.76 an hour. Route drivers avg $33K and Rep’s $44K.
I would hardly call this over-paid… This is an average of $18.96 an hour for the working class employee.
CEO Brian Driscoll, $1,009.62 an hour = $2.1 Million salary
PLUS up to another 7.1 million annual bonus… Although, I suspect he may get a little less this year…
“The average American worker earned a whopping half a percent pay increase last year, which after inflation is actually a pay decrease. But if you are lucky enough to be a CEO at a big company, 2010 was a banner year.
The New York Times commissioned a study to look into executive pay, and it found out that the average CEO was paid $10.8 million last year - that’s a 23 percent increase. ”
Yeah buddyboy, you just go ahead and keep blaming the working man.
WHS
WHS on January 11 at 12:40 p.m.
And just in case your math skills are as sharp as your intellect…
Driscoll averages more in a week, than the majority of Hostess employees average in year… That’s $40,384 a week.
WHS
dataxman on January 11 at 1:47 p.m.
WHS - can you provide a source for your salary/compensation numbers? Since Hostess was a private company those numbers usually aren’t published…
I won’t defend the CEO (nobody is worth that much but if the owners want to pay it that is their business) - but would it have mattered? Figure he made it for the two years since they existed bankruptcy and throw that $18 million back into the kitty. Now they are only have $982 million in liabilities. With their legacy costs they still weren’t going to be able to last
WHS on January 11 at 2:31 p.m.
dataxman, I would have to look it all up again… Probably should have posted it in the first place, as it was not easy to find that’s for sure, and to be honest I am not going to do it again.
However, my point was not regarding salary, as you are absolutely correct in that a private company can choose to pay whatever they want. I am good with that… My point is directed at the morans who constantly deride the working man for making a living wage or collectively bargaining for better compensation. Notapatriot is blaming the Unions and the working man for this companies failings… Stating that they are only “minimum wage” employees. Yet these same people will vehemently defend multi-million dollar salaries for the top executives. To me, this is just bassackwards.
This corporation is trying to blame the very same employees that made them billions for the last how many years! They are not blaming the product, marketing, executive salaries, mismanagment of funds, etc… No, they blame the workers.
In my opinion, had these million dollar men been doing their jobs, they should have seen this coming and prepared for it. But No, they were too busy maximizing profit. So, rather than planning for these future costs, they just go bankrupt and then blame the employees. Sorry, but just like million dollar athletes… These million dollar CEO’s better perform as well and should be held accountable. It is not the Unions fault, because they did nothing that was not agreed upon with the company in the first place!
WHS
dataxman on January 11 at 2:57 p.m.
WHS - I do blame the Unions a bit - they used strike threats to get the concessions. I blame management more as they agreed to the concessions figuring their projections could cover the costs and still make a profit. Problem was costs escalated faster than anyone estimated at the same time people began living longer. Sorta blew their actuarial tables out of the water. I don’t think any CEO could have figured a way to keep the company going - or any company with the legacy costs. Outside of Ford, are there any companies that offered defined benefit retirement plans and full health care for life to their workers still around?
Don’t compare CEO’s to athletes - with a CEO it is a one time chunk of change. The Seahawks had to pay Brian Bosworth millions for years after he was cut!
cryssT on January 11 at 3:02 p.m.
Given that Hostess hasn’t been paying into the Unions as required what will happen (like Kaiser) is that the bankruptcy will send the pensions to the Pension Benefit Guaranty Corporation, the retirees will have changes to either their pensions or their health benefits and new employees will ‘enjoy’ a 401K plan.
westerly on January 11 at 5:00 p.m.
Bad food, full of corn syrup, hydrogenated oils etc……. sayonara…
Blondscence on January 11 at 5:45 p.m.
Unions could discontinue if need be. CEO and Interstate could simply terminate with reorganisation (Ch 11). Two way street it seems to me.
If the union doesn’t like the wage, they can leave with their people. Interstate would hire other workers with the unions.
Simple formula. Both get what they want. Hostess is thinking that they have jobs, just not Union jobs with their added expense. Fully 1/3 of the labor costs would vanish. It’s a lot like Kaiser in North Spokane. Lost jobs…but it’s their choice I guess.
When you’re out of money, you’re out of money. SImple.
Scoutster on January 11 at 6:44 p.m.
I’d be scared to live in a Twinkie-less world.
Thank you, President Obama, for ruining both my diet and my day!
Nothing left to do now but go to the casino.
misjustice on January 12 at 7:29 a.m.
I don’t know anyone that buys Hostess products; maybe that’s their larger problem?