Hostess Brands seeks court approval to close operations

Hostess Brands, a producer of bakery products in the US, has announced that it is seeking permission from the US Bankruptcy Court in New York to close its business and sell its assets, a move which will lead to a loss of up to 18,500 jobs.

The move comes after the company’s largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) began a nationwide strike in November rejecting the company’s contract offer with lowered wages and benefits.

On 12 November, Hostess Brands closed three bakeries, blaming work stoppage on the strike, and warned that it would be forced to liquidate if employees did not return to work to resume normal operations.

If the US Bankruptcy Court approves the liquidation, it would lead to the closure of 33 bakeries, 565 distribution centres, approximately 5,500 delivery routes and 570 bakery outlets across the US.

The company is also planning to sell its brands including Hostess, Drakes and Dolly Madison, Twinkies, CupCakes, Ding Dongs, Wonder, and Nature’s Pride, among others.

Potential bidders for the brands may include US food company Flower Foods, US private equity firm Metropoulos, and Mexican food company Grupo Bimbo.

Hostess Brands chief executive officer Gregory F Rayburn said that while the company regrets the decision to close operations, it does not have the financial resources to bear an extended nationwide strike.

"Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders," Rayburn added.

Hostess Brands, which has been affected by increasing debts, soaring labour costs and the changing tastes of consumers, filed for bankruptcy in January 2012 for the second time in its history, declaring assets of $982m and debt of $1.43bn.

Following this, the company management proposed the changes to lower wages, citing that the business was unprofitable under its current cost structure.

This was meant to attract new capital injection in order to emerge from Chapter 11 bankruptcy.

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Image: The closure of Hostess Brands will lead to the closure of 33 bakeries, 565 distribution centres, approximately 5,500 delivery routes and 570 bakery stores across the US, affecting 18,500 employees. Photo courtesy of Hostess Brands.