Twinkies maker Hostess plans to go out of business


Hostess Brands Inc, the bankrupt maker of Twinkies and Wonder Bread, has sought a U.S. court's 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 snack cakes and breads, filed the request with the U.S. Bankruptcy Court in New York early Friday morning.

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

Hostess immediately suspended operations at all of its 33 plants across the United States as it moves to start liquidating assets, it said.

"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. But some bakeries will never open again as bakeries."

Ignon said the company was making final deliveries on Friday of products made Thursday night. Hostess's top-selling products are its chocolate cupcakes, cream-filled Twinkies cakes and its powdered sugar and frosted "Donettes."

Entrepreneurs on auction site eBay are asking as much as $100 for a box of 10 Twinkies - plus $5 shipping - according to one listing that went up shortly after the company's liquidation filing. "Soon To Be Gone Forever," the listing reads.

Hostess blamed burdensome wage and pension obligations for its financial woes. It said a strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which began last week, was the latest of a series of labor troubles that had crippled the company's ability to produce and deliver products at several facilities.

A few workers were still walking picket lines early Friday morning, many expressing hope that some of the Hostess operations might survive. They blamed what they characterized as "Wall Street" management for the company's demise.

"The people who are running this company are not interested in making bread," said Roger Harrison, 56, who bags buns at the Hostess plant in Lenexa, Kansas, and has been with the company for 35 years.

"They are not in the baking industry; they are just interested in the money," said Harrison, 56. "This company is so unstable that once they close, maybe someone can take over and buy it and give us more stability."

Union President Frank Hurt said management was trying to make union workers the scapegoats for a long-held plan by Wall Street investors to break up Hostess.

Hostess had given employees 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.

The company was asking workers to agree to an 8 percent pay cut, a 20 percent increase in healthcare costs, closure of 10 to 12 plants and changes to pension and workday provisions.

Hostess managers have complained that terms of many of the 300 labor contracts that the company has in place have bogged down its ability to be both nimble and cost-competitive.

"The union has been the death of this company," said a human resources manager who recently left Hostess.


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

Hostess has 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Besides Twinkies and Wonder Bread, its brands include Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita.

The company said in Friday's court filing 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.

Hostess said it had been gauging acquisition interest for certain brands for months and in late September received "a number of potentially viable proposals" to purchase certain assets.

No investor was willing to acquire the entire company with the existing collective bargaining agreements in place, according to Hostess officials.

SunTrust Robinson Humphrey analyst William Chappell Jr. said Flowers Foods Inc could be among the potential buyers for some Hostess assets. And he said the company's liquidation was a "positive step" for the sector as it will shrink the number of major vendors.

"The consolidation should lead to a more normalized competitive environment," he said.

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 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.

The case is In re: Hostess Brands Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052. (Reporting by Tanya Agrawal in Bangalore and Carey Gillam in Kansas City and Jonathan Stempel in New York; Additional reporting by Ben Berkowitz and Nick Zieminski in New York; Editing by Lisa Von Ahn)