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Hostess Brands prepares to file Chapter 11

January 18, 2012
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Hostess Brands Inc., Irving, Tex., is reportedly preparing to file for Chapter 11 bankruptcy protection, say people familiar with the matter. The move would mark the second significant court restructuring for the Twinkies and Wonder Bread baker in the past several years.

The privately held company, which employs roughly 19,000 people and carries more than $860 million in debt, has been facing a cash squeeze along with high labor costs and rising prices for sugar, flour and other ingredients, sources say. Those costs together have proved higher than the company's roughly $2.5 billion in annual sales, creating losses and cash shortfalls, the sources add.

Hostess's filing would mark what is known as a Chapter 22 proceeding in restructuring circles, since the company had already sought bankruptcy protection once before.
Hostess, previously called Interstate Bakeries Corp., slashed debt and costs during a four-year stint in bankruptcy court that began in 2004. The company has struggled since emerging from bankruptcy proceedings in February 2009.

News that Hostess Brands filed for bankruptcy protection prompted many consumers, even sophisticated pastry chefs, to speak fondly of Twinkies. For many, the news brings a bit of nostalgia for the company’s signature snack cake product, the Twinkie, with a shelf life said to be possibly sufficient to survive nuclear war.

Nearly 36 million packages of Twinkies were sold in the year ended Dec. 25, down almost 2% from a year earlier, according to information from SymphonyIRI Group, a Chicago-based market-research firm. The data captures sales from supermarkets, drugstores, mass-market retailers and convenience stores, but exclude sales from Wal-Mart Stores Inc. and clubstores.

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