Hostess Brands Preparing for Chapter 11 Filing

Hostess Brands Inc. is preparing to file for Chapter 11 bankruptcy protection as soon as this week, said people familiar with the matter, a move that would mark the second significant court restructuring for the Twinkie and Wonder Bread baker in the past several years.

The privately-held Irving, Texas, company, which employs roughly 19,000 people and carries more than $860 million in debt, has been facing a cash squeeze amid high labor costs and rising prices for sugar, flour and other ingredients, according to people familiar with the matter.

Those costs together have proved higher than the company's roughly $2.5 billion in annual sales, creating losses and cash shortfalls, they said.

Hostess also currently owes more than $50 million to vendors, which have been demanding payments on shortened timeframes after delivering goods because of Hostess's financial condition, one of the people said.

Hostess's filing would mark what's known as a "Chapter 22" in restructuring circles, since the company had already sought bankruptcy protection once before.