Report: Hostess to File for Chapter 11 Bankruptcy
Posted on January 10, 2012The Wall Street Journal reports that Hostess is going to file for Chapter 11 bankruptcy protection. The Texas company employs 19,000 people. The WSJ says rising costs for sugar, flour and other ingredients used in Hostess treats, plus rising labor costs, has put Hostess in a serious cash crunch. Hostess is also carrying $860 million worth of debt. Hostess has annual revenues of $2.5 billion, but it is still losing money.
Americans have been eating Hostess products for decades. Twinkies have been around since 1930. The current version of Hostess Cupcakes hit the shelves in 1950 after baking executive D.R. "Doc" Rice added the signature seven squiggles and vanilla-creme filling. Hostess Brands also makes Wonder Bread. The Hostess treats themselves are probably not threatened by the bankruptcy; another company could purchase Hostess in a worst case scenario. Then again, a new company might not make the treats exactly the same way.
Hostess's bankruptcy plans include reducing debt and renegotiating labor contracts. This will be the second time in bankruptcy for the company. The company spent nearly five years in bankruptcy from 2004 to 2009 when it went by the name Interstate Bakeries Corp.