Jan 11, 2012 10:02 AM by Paul Kavanaugh
NEW YORK (AP) -- Hostess Brands Inc., the maker of Twinkies and Wonder Bread, is seeking bankruptcy protection, blaming its pension and medical benefits obligations, increased competition and tough economic conditions.
The Chapter 11 filing on Wednesday comes just two years after a predecessor company emerged from bankruptcy proceedings.
That company, called Interstate Bakeries and based in Kansas City, Mo., filed for bankruptcy protection in 2004. It emerged in February 2009.
But Hostess said Wednesday that its previous efforts to produce incremental change, including the prior Chapter 11 case, were insufficient.
In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess disclosed that its biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes approximately $944.2 million.
Its second-largest unsecured creditor, Central States, Southeast and Southwest Areas Pension Plan is owed far less, about $11.8 million.
Hostess President and CEO Brian Driscoll said in a statement that the company is working to reach a consensual agreement with its unions to modify its collective bargaining agreements. The company said that its current cost structure is not competitive mostly because of legacy pension and medical benefit obligations and restrictive work rules.
Hostess said those issues, coupled with more competition and the difficult economic conditions, created a worsening liquidity situation that drove its need to reorganize.
In its bankruptcy filing, Hostess also listed its estimated assets between $500 million and $1 billion and its estimated liabilities at more than $1 billion.
The privately held Irving, Texas-based company said that it will be able to maintain routine operations thanks to a $75 million financing commitment from a group of lenders led by Silver Point Capital LP.
Reports had surfaced earlier in the week that the bakery company was planning to make such a filing.