Let me start off this post by saying that Hostess makes shitty products. Their snack cakes alone have contributed as much as any single factor to the obesity epidemic in America. And Wonder Bread is actually a crime against the fine art of baking. Still, it's tough to see anyone facing the prospect of losing their job, especially right before the holidays. Here is the New York Post with the details:
Hostess Brands, America’s biggest bakery, is on the verge of filing for bankruptcy again — perhaps as early as next month, The Post has learned.It's an all too common theme these days, lose your benefits or lose your job altogether. Here is a telling quote:
Staying out of Chapter 11 is proving tough for the Twinkies maker, a source said, adding the question now is whether it will be a pre-packaged bankruptcy or not.
“We are working hard to keep it out of [Chapter] 11,” another source close to the months-long talks with lenders and unions said.
The tipping point: Hostess maintains it cannot afford to stay current on its $700 million in outstanding loans and keep contributing to the unions’ pension plans, sources said.
Hostess has not been paying future pension benefits since August, thereby breaking its union contracts.
Even with the pension expense savings, the company still needs more money within the next several weeks. And private-equity firm Ripplewood Holdings, which holds a controlling ownership in Hostess, will not reinvest capital unless it gets its union concessions, one source said.
“I would read that as pretty drastic,” another source said. “It’s not easy to resolve that kind of issue.”
A Hostess worker said, “We understand that, should we pursue some form of legal action to require the company to live up to the terms of the contract, they may close, but we have come to believe that they will close anyway.So what exactly will bankruptcy mean?
Much is at stake for Twinkie the Kid. The firm filed for Chapter 11 in September 2004 and spent 4 1/2 years there before Ripplewood in February 2009 bought it after gaining union concessions.So typical, the financial institutions get paid while the workers get the shaft. Just another sad tale of modern corporate America. Almost makes me wish I had some comfort food to help me forget all my troubles.
There is a concern that if it files again, the result could be liquidation with many of its brands, including Hostess, Wonder, Nature’s Pride, and Drake’s, sold for cash.
In that scenario, the first to be paid would likely be the company’s lenders, including General Electric, Monarch Alternative Capital and Silver Point Capital.
The unions will likely rank behind them in a bankruptcy, and Ripplewood’s equity stake would be wiped out, sources said.