On behalf of Law Offices of Mark M. Kratter, LLC on November 28, 2012
A sigh of relief has gone through Connecticut and Twinkie lovers across the nation, however short-lived it may be. A judge noticed Hostess and its second largest union had not gone through private mediation before the company's Chapter 7 bankruptcy filing. The two will now take the step of mediating soon, but if they cannot come to an agreement liquidation will resume. The company had been struggling for several years and the Chapter 7 is its second bankruptcy attempt in less than 10 years.
Hostess decided that they could no longer make it through the restructuring that is the goal of a Chapter 11 proceeding. The company asked the court to allow it to sell off their assets and begin the process of closing down their business. The company has been saddled with debt, higher labor costs and turmoil within the management regime.
The death blow to the company appears to have been the new contract Hostess offered their workers. In the past, Hostess had given $100 million per year in pension costs. The new contract would have substantially slashed that amount, cut salaries and also reduced worker's health benefits. The union rejected the new contract and went on strike. Hostess was already suffering financially and from mismanagement, but the strike was enough to cripple the icon and force the company to make a tough decision.
Hostess will still have a chance to remain open if mediation talks go well. However, if it decides to proceed with Chapter 7, it is likely that the company will be bought by someone else. Several buyers are expressing interest in the company, and although the business is taking a hit financially, Twinkies actually brought in close to $70 million this year. Regardless of what happens, it is possible that Connecticut residents will still be able to buy Hostess products.
Source: CTPost.com, "Twinkies maker Hostess lives at least another day," Candace Choi, Nov. 19, 2012
