Twinkie-maker Hostess files for bankruptcy citing pensions

Hand STEVEN CHURCH ostess Brands Inc., the maker of Twinkies snack cakes and Wonder bread, has fallen back into bankruptcy less than three years after completing an earlier restructuring.

The baker ended an earlier trip through bankruptcy court in February 2009 when buyout firm Ripplewood Holdings LLC and lenders took control of Interstate Bakeries Corp., which was renamed Hostess Brands.

In a press statement Wednesday, Hostess blamed the latest bankruptcy on a weak economy and costs tied to pensionand medical-benefit obligations. The Irving, Texas-based baker intends to withdraw from pension plans and modify collective-bargaining agreements with unions, according to court documents.

“This company has tremendous potential if we can remove barriers to success,” chief executive officer Brian Driscoll said in the statement.

Hostess had total assets of about $982 million and total liabilities of about $1.4 billion as of December 10, according to court papers. The Chapter 11 case was assigned to US Bankruptcy Judge Robert Drain in White Plains, New York.

Merger in 1937 Interstate Bakeries was created through the merger of Schulze Baking Co. and Western Bakeries Ltd. in 1937 and grew by acquiring other companies, according to court documents filed in the first bankruptcy case. It acquired its biggest rival, Continental Baking Co., in 1995 for $330m., according to the company’s website.

The company’s products include Hostess Cupcakes, Ding Dongs, Drake’s Devil Dogs and Nature’s Pride breads. It employs about 19,000 people, of whom 83 percent are union members, according to court papers. The majority are members of the International Brotherhood of Teamsters or the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, the company said.

The Teamsters said in a press statement its national bargaining committee has been working with Hostess management for months “to identify a consensual resolution that would address the company’s many problems.”

More than 7,500 of Hostess’s fleet of delivery drivers and merchandisers are Teamsters, according to the union.

‘Mutually agreeable solution’

“While no agreement has been reached to date, the Teamsters Union remains committed to working with all stakeholders during the bankruptcy to find a mutually agreeable solution, if possible,” Dennis Raymond, director of the Teamsters Bakery and Laundry Conference, said in the statement.

In September 2004, burdened with declining sales combined with high labor and ingredient costs, Interstate filed for bankruptcy in Kansas City, Missouri. During the case, it closed plants, cut delivery routes and eliminated jobs.

The company exited bankruptcy in February 2009 with a restructuring plan backed by New York-based Ripplewood and lenders including Silver Point Capital LP, according to court documents.

Ripplewood invested $130m. for stock and convertible notes. Silver Point and other lenders also received shares in the company, according to court papers.

(Bloomberg)