Things have soured for Hostess Brand. The maker of lunchbox favorites like Twinkies, Ding Dongs, Hohos and Drakes snack cakes will file for Chapter 11 bankruptcy.
The Wall Street Journal reported Tuesday that the company has more than $860 million in debt .This is Hostess' second bankruptcy filing in less than a decade. Even though the company boasts sales of $2.5 billion annually, it cannot keep up with the rising cost of ingredients for its baked goods like flour and sugar.
Hostess filed for Chapter 11 in 2004 and has had trouble getting its footing ever since, despite investments and loans from private equity firms and hedge funds, reports WSJ. The company's private-equity owner, Ripplewood Holdings, pumped in $40 million last year. Hedge funds Monarch Alternative Capital, Silver Point Capital and others also gave a $20 million loan as well.
The company does have enough to keep it afloat while in bankruptcy. It has lined up $75 million in what is known as debtor-in-possession financing. This is a relief for Hostess' 19,000 employees.
TIME noted that 36 million packages of Twinkies were sold last year. This was a 2 percent decline from the year before. This may have to do with more health-conscious initiatives. Hostess attempted to make a move into healthier foods with whole-grain bread, but the product was not a hit.
Hostess' financial woes include an underfunded pension plan and numerous labor union contracts in need of renegotiation, both of which must be resolved in order to prevent liquidation. Hostess pays almost $100 million each year in multi-employer pension plans that cover employees at a wide array of companies, reports WSJ. Its pension plan is currently underfunded by $2 billion.
Despite the decline in sales, people seem to be in a state of shock. Users took to Twitter to voice their sadness at the potential loss of beloved lunchbox favorites. No more Twinkies, ding dongs and ho-hos?!?!? Saaad! tweeted one user. I am so happy to know that despite bankruptcy proceedingsTwinkies will still be produced. There is a god! wrote another. Both Twinkies and Hostess Brands were trending on Twitter Wednesday morning.