Hostess Brands, the maker of such iconic brands as Twinkies and Ding Dongs, has asked a federal bankruptcy judge for permission to cease its operations and liquidate the company’s assets underChapter 7 bankruptcy. While this may not mean the end of the company’s beloved snack cakes — the brands likely will be sold at auction — it will mean the end of employment for nearly 18,000 Hostess employees.
Hostess has had financial challenges for some time. The company first filed for bankruptcy protection in 2004 and then again in January 2012. Those earlier bankruptcy proceedings sought to reorganize the company’s debt under the initial filings.
The company’s most recent filing seeks asset liquidation under Chapter 7. It comes after a failed effort to gain concessions from union workers. When union negotiations broke down, Hostess unilaterally imposed cuts in wages and benefits. That action resulted in a strike at 24 of the company’s 33 plants, and striking workers refused to return to work by a Nov. 15 deadline set by the company. Hostess officials now say the company does not have the financial resources to continue operations in the face of the strike.
Chapter 7 for businesses is a measure taken when a company can no longer operate due to overwhelming debt. When a company files for Chapter 7 bankruptcy, all collection actions immediately cease. A trustee is appointed by the bankruptcy court to liquidate determined company assets through sale or at auction in order to pay creditors and investors with the proceeds. Chapter 7 bankruptcy is a complex process; a business owner considering liquidation would benefit from the help of an experienced bankruptcy attorney.
Source: WPTV.com, “Hostess bankruptcy: Twinkies-maker Hostess Brands to go into liquidation, files for bankruptcy,” James O’Toole, Nov. 16, 2012by