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Hostess filing for bankruptcy

January 15, 2012
Times Leader

WHEELING - A local Hostess outlet is expected to remain open while the company goes through Chapter 11 bankruptcy protection proceedings.

Hostess spokeswoman Anita-Marie Laurie said Thursday all Hostess stores will continue to stay open, including the Wheeling outlet, located at 2200 Main St.

''We received a commitment of $75 million in financing. ... Our employees will get paid and our customers will continue to get product,'' Laurie said.

Article Photos

Hostess Twinkies are shown in a studio photograph in New York. Hostess Brands Inc. is filing for Ch.11 bankruptcy protection and said this past week that it will be able to maintain routine operations thanks to a $75 million financing commitment from a group of lenders.

Hostess Brands Inc., which makes Twinkies, Ho Hos, Fruit Pies and many other products, and its subsidiaries on Wednesday filed for Chapter 11 bankruptcy protection. In addition to Hostess, the company's other brands include Wonder, Nature's Pride, Merita, Beefsteak, Home Pride, Drake's and Dolly Madison.

A worker at the Wheeling outlet declined to comment, referring questions to the corporation. A customer in the store, who declined to be named, noted he didn't shop there often but had heard about the bankruptcy proceedings. When asked if the news prompted him to pay the outlet a visit, the man said, ''No, my sweet tooth did.''

Laurie said despite what some may believe, there continues to be a high demand for Hostess products. But apparently others disagree.

Hostess, which is a privately held company, doesn't disclose sales figures. But analysts say the iconic brand has been hurt by Americans' changing eating habits. Hostess' snacks don't neatly fit into the U.S. trend toward a healthier lifestyle that includes a diet rich in whole wheat foods, fruits and vegetables.

For examples, Twinkies, a snack cake with a cream filling, has 150 calories and 4.5 grams of fat. Meanwhile, a Ding Dong chocolate cake with filling has 368 calories and 19.4 grams of fat.

"The iconic status of Twinkies is partly this perception that there's nothing real in it," said Ken Albala, professor of history at the University of the Pacific, in Stockton, Calif., who specializes in food history. "It's this cake filled with an unidentifiable sugary cream filling that never goes bad."

Hostess has other problems, too. In Hostess' Chapter 11 filing, the company said its rivals have combined and expanded their reach, heightening competition in the snack space. Hostess' competitors range from Bimbo Bakeries, which makes Entenmann's baked goods, and McKee Foods, which makes Little Debbie snack cakes. It also faces competition from larger food makers like Sara Lee and Kraft Inc.

Additionally, Hostess employees are unionized while most of its competitors aren't. As a result, Hostess has high pension and medical benefit costs. The company has 19,000 employees and operates in 48 states. Hostess did not announce layoffs, but spokesman Lance Ignon said Wednesday the company will make future decisions "in the best interest of the company."

CEO Brian Driscoll said Hostess is working to reach a consensual agreement with its unions to modify its collective bargaining agreements. Hostess also hopes to modernize its systems, fleets and plants to keep pace with customer needs.

"This company has tremendous potential if we can remove the barriers to success," Driscoll said.

The Teamsters Union, which represents about 7,500 of Hostess' delivery drivers and merchandisers, said in a statement on Wednesday that it is also committed to working toward a solution.

The company's filing comes nearly three years after its predecessor emerged from bankruptcy proceedings. That company, called Interstate Bakeries and based in Kansas City, Mo., filed for bankruptcy protection in 2004 and changed its name to Hostess Brands after it emerged in 2009.

Hostess said Wednesday that its previous efforts to change, including the prior Chapter 11, were insufficient. Under its most recent bankruptcy filing, it is looking to restructure into a "strong, competitive" company.

In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess listed about $860 million in debt. The company's biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes about $944.2 million. Hostess also listed its estimated assets between $500 million and $1 billion and its estimated liabilities at more than $1 billion. The Irving, Texas-based company said that it will be able to maintain routine operations thanks to the $75 million financing commitment from a group of lenders led by Silver Point Capital LP.



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