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Hostess Brands Says It Will Close,|Fire All 17,780 Unionized Workers

DALLAS (CN) - Hostess Brands, maker of Twinkies and Wonder Bread, says it will fire all of its 17,780 workers and go out of business after employees refused to end a nationwide strike.

Hostess Brands, of Irving, announced the move this morning (Friday).

The company filed for Chapter 11 bankruptcy protection in January, citing its enormous debt load, pension and labor costs.

On Thursday, Hostess said it would file a motion to liquidate the company in Manhattan Bankruptcy Court if employees did not return to work by 5 p.m. that day.

"We simply do not have the financial resources to survive an ongoing national strike," said Gregory F. Rayburn, Hostess chairman and CEO. "It is now up to Hostess' [Bakery, Confectionery, Tobacco Workers and Grain Millers Union] represented employees and Frank Hurt, their international president, to decide if they want to call off the strike and save this company, or cause massive financial harm to thousands of employees and their families."

Hostess said in a statement that it has done everything in its power to reorganize its business as a going concern, including spending 18 months negotiating with its key constituents.

"As previously disclosed, the company has obtained the support of its largest union, the International Brotherhood of Teamsters, and its lenders," the company said. "With the support of the BCTGM, Hostess believes it would successfully reorganize."

Hostess said it will request a Monday hearing on the motion to liquidate and if granted, will begin closing all of its operations on Tuesday.

"The closures will include the termination of all employees except small, temporary crews to clean, secure and prepare facilities and other assets for sale," the company said.

Hostess operates 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores.

The company said in its bankruptcy filing that its cost structure "left it poorly positioned to respond to a worsening economy, increased competition and consolidation in the industry that has given other bakery companies major economies of scale and workforce advantages."

Eight of the company's top 10 creditors in the bankruptcy filing are pension funds.

The top unsecured creditor is Bakery & Confectionary Union & Industry International Pension Fund; it is owed more than $944 million.

In distant second is unsecured creditor Central States, Southeast and Southwest Areas Pension Plan; it is owed more than $11.8 million.

Hostess in January blamed the unions for the bankruptcy, citing "a number of significant financial commitments and arcane work rules imposed by collective bargaining agreements."

It said it was going through a "cash burn" of $2 million per week, that its competitive disadvantage is due almost exclusively to its collective bargaining agreement obligations, which have "never been meaningfully addressed."

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