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Hostess Brands may shut down or be bailed out

May 21, 2012
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Private-equity firm KPS Capital Partners and at least one other bidder have made formal offers to buy bankrupt Hostess Brands, Irving, Texas, offering a potential lifeline to the maker of the iconic snack cakes, according to reports in The New York Post. Reports claim the bids likely range from $500-$600 million for the nation’s biggest bakery, whose brands include Wonder Bread, Ding Dongs and Drake’s coffee cake.

Formerly Interstate Bakeries Corp., privately held Hostess Brands employs roughly 19,000 people and has a reported $860 million-plus in debt. The company has been trying to renegotiated burdensome union contracts with the Teamsters and unsustainable pension obligations.
Hostess went through bankruptcy proceedings in 2004 and after three years of reorganization was able to slash costs and stay in business. The company has struggled since then, however.

Hostess was going to court in May 21, and as of presstime, was expected to tell the bankruptcy judge if it has accepted any of the offers. The baker reportedly has warned its large workforce that they may be out of job if things don’t go well. Reports also mention that the baker warned the State of Texas it might have to shut down and liquidate its business, should certain conditions happen during its Chapter 11 bankruptcy reorganization. The notice to the state did not include the number of employees in Texas who would be affected.


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