Hostess Brands Inc., the maker of the popular Twinkies and Wonder Bread, is filing for bankruptcy, reports the Wall Street Journal.
The purveyors of the cream-filled fantasy are based in Irving, Texas, and employ roughly 19,000 people, while carrying nearly a billion dollars in debt. The debt persists despite nearly $2.5 billion in sales. The reason is that all the good stuff that goes into those delicious morsels of heavenly manna with no nutritional value is costly (as divine foods should be). What is not so divine? Those lackluster sales.
Since Hostess has already filed for bankruptcy once before, it will be doing what is called in bankruptcy parlance, a Chapter 22. (In other words, Chapter 11 times two.)
The first Chapter 11 for Hostess, back when it was known by the exciting name, Interstate Bakeries Corp, was in 2004. Interstate had been around since 1930.
Chapter 11 bankruptcy is intended primarily for the reorganization of businesses with heavy debt burdens (like for instance, a billion dollars). Although it’s uncommon, consumers may file for Chapter 11 in some rare instances. Chapter 11 allows the debtor to propose a plan for profitability post-bankruptcy, which may include trimming costs and seeking new sources of revenue or income, while temporarily holding creditors at bay.
In contrast, Chapter 7 bankruptcy (often referred to as a liquidation) involves the closure of the debtor business and the sale of liquid assets to repay creditors.
As it is being currently reported, Hostess is desperate to avoid Chapter 7. And no, if after going Chapter 22, you go Chapter 7, that doesn’t make it Chapter 29 (though maybe it should be called that just to keep Atlanta bankruptcy attorneys on their toes).
And just in case some of you out there were worried your Twinkies might be taken from your sticky, moist hands; that won’t happen just yet. According to the Hostess_Snacks Twitter feed: “Don’t worry, we’re still making Twinkies, and plan to do so for the foreseeable future. Hope you’ll continue to enjoy them!”
Um, yeaahh, we will.
Related Resources:
- Find an Atlanta Bankruptcy attorney (FindLaw)
- Twinkie’s Twilight? (Washington Post)
- Chapter 11 Bankruptcy (FindLaw’s KnowledgeBase)
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