Back in January we posted about Hostess Brands Inc. filing for Chapter 11 bankruptcy. The hope was this restructuring would allow the company to figure out a way to pay off its creditors and once again be a profitable business.
However, it appears a new plan would have meant a new contract with a cut to salaries. This led to a strike and the company has since asked for permission from the federal bankruptcy court to close its operations. This closing announcement was made on Friday and operations seized at all locations across the country the same day.
This was the second time Hostess had filed for bankruptcy. The first time was in 2004. The company did not re-emerge from the restructuring until 2009.
The CEO of Hostess, Gregory Rayburn, released a statement claiming Hostess just did not have the financial resources to weather a strike by the bakers, who were protesting the salary-cutting contract. In addition to an 8 percent cut, how much the company contributed to employee health care and pension obligations would have also been cut.
Looking to the future, once the federal bankruptcy court grants permission, Hostess will be selling its assets to the highest bidder. This could result in a new look for some of the more popular products, such as Twinkies.
With the news of this closure, nearly 18,500 Hostess workers also lost their job. And, even when the assets of the company are purchased, it has been reported these workers will not get their jobs back.
For the average Florida resident the news of this closure shows the direct correlation between a business' financial struggles and its employees. Fortunately, an attorney who handles bankruptcy cases for businesses can also be of assistance to those employees who end up falling into debt.
Source: WPTV, "Hostess bankruptcy update: After Monday's liquidation hearing, nearly 18,500 workers will lose jobs," Chris Isidore and James O'Toole, Nov. 20, 2012