(CN) – Hostess Brands, maker of Twinkies and Wonder Bread, filed for Chapter 11 bankruptcy protection Wednesday in Manhattan, saying an enormous debt load and pension and labor costs make it difficult to compete.
Irving, Texas-based Hostess Brands filed in federal bankruptcy court 2 years after its predecessor, Kansas City-based Interstate Bakeries Corp., emerged from bankruptcy. Interstate had filed for bankruptcy protection in 2004.
Hostess also makes Ho Hos, Ding Dongs, and also operates as Holsum, Sunbeam and Dolly Madison Bakeries, and 30 other trade names.
Hostess said in a statement Wednesday that previous efforts at incremental change, including the previous bankruptcy filing, were insufficient and that its current cost structure is “not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules. Those issues, combined with the economic downturn and a more difficult competitive landscape, created a worsening liquidity situation that prompted the need for a reorganization.”
The company said 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 filing are pension funds.
The top unsecured creditor is Bakery & Confectionary Union & Industry International Pension Fund; it is owed over $944.1 million.
In distant second is unsecured creditor Central States, Southeast and Southwest Areas Pension Plan; it is owed more than $11.8 million.
Hostess listed its assets as between $500 million and $1 billion and its liabilities at more than $1 billion.
The company said that it will be able to maintain routine operations due to $75 million in debtor-in-possession financing from a group of lenders led by Silver Point Capital LP.
Hostess also filed a motion procedures Wednesday to establish a timeline for addressing its labor agreements.
“Notwithstanding the procedures motion, we will do everything we can to reach a consensual agreement with our unions to modify our collective bargaining agreements,” said Hostess president and CEO Brian Driscoll .
“We have engaged in good-faith bargaining with our labor partners for many months. We remain hopeful that we can reach an agreement that will allow us to amend our labor contracts so that we can emerge from Chapter 11 as a highly competitive company that provides secure jobs for our employees.”
Hostess said it seeks to create a sustainable cost structure with competitive employee benefit plans that allow it to invest in modern systems, fleets and facilities to meet changing customer tastes.
“With these changes, we can access capital to reinvest in our company again and begin to level the playing field with our competitors,” Driscoll said. “This company has tremendous potential if we can remove the barriers to success.”
Founded in 1930, Hostess Brands has about 19,000 employees, operates 36 bakeries, 565 distribution centers, about 5,500 delivery routes and 570 bakery outlet stores throughout the country, according to its website.