No Ho Ho Ho or Be Merry for Hostess
According to legend, a Twinkie has an indefinite shelf life. The outcome of the most-recent Hostess Brands, Inc. bankruptcy might put that legend to the test. After rounds of labor negotiations, Hostess could not reach an agreement with all of its union employees to accept wage, pension, and benefit reductions. The company announced its plan to cease operations and liquidate its assets on November 16, 2012.
The Hostess story has local ties, as the company traces part of its history to Interstate Bakeries Corporation. IBC was founded in 1930 and based in Kansas City, Missouri. Over the years, the company’s name changed several times due to mergers and shifts in ownership. During its long and storied history, the company’s stable of iconic brands included the likes of Twinkies, Ding Dongs, CupCakes, Ho Ho’s and Wonder Bread.
Hostess is in Chapter 11 bankruptcy for the second time, which is referred to as a “Chapter 22” in bankruptcy parlance. Hostess also filed for Chapter 11 bankruptcy in 2004. This time around, however, it appears to be the end for Hostess. Instead of reorganizing, the company is seeking authority from the bankruptcy court to liquidate its assets, including the rights to its popular brands.
When a financially distressed company files for Chapter 11 bankruptcy, its goal is typically to reorganize its debt and emerge from bankruptcy as a sustainable and more profitable entity. Chapter 11 bankruptcy can also allow for labor contracts to be renegotiated and business operations to be streamlined. However, if these goals become unworkable, a company may end up liquidating its assets for the benefit of its creditors.
Recent news stories reported consumers clearing entire store shelves to stockpile their favorite Hostess creations—fearing they will soon be gone forever. While it is true that some Hostess brands may disappear entirely or at least for a while, the most popular brands will likely be sold to the highest bidder and live on for future generations.
The bankruptcy case was filed on January 11, 2012 and is In re: Hostess Brands, Inc., Case No. 12-22052, filed in the United States Bankruptcy Court for the Southern District of New York. For more information regarding Chapter 11 bankruptcy, please contact Klenda Austerman attorney Eric Lomas by telephone at 316.267.0331 or email at firstname.lastname@example.org.
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