If you’re a Baby Boomer and a reader of the Wall Street Journal or any other business newspaper or magazine, you may have heard Hostess, the maker of Twinkies and Wonder Bread is once again filing for bankruptcy protection.
A story in the Wall Street Journal by Mike Spector and Julie Jargon, “Twinkies Maker Preparing for Chapter 11” has an enticing title but the bakery giant can’t file for Chapter 11—because they’ve already filed for bankruptcy protection in the past (2004-2009) so it’s really Chapter 22 they’ll be facing.
Chapter 22 is also a restructuring similar to Chapter 11 but with $860 million in debt and late vendor payments of approximately $50 million, one wonders how Twinkies and Wonder Bread sales can save this company? The Wall Street Journal reporters said Twinkie sales were down some two percent in 2010, but the sales figures didn’t include Wal-Mart stores. Why not? Do they buy their own Twinkies or what? Hmm?
The company also blames consumers saying Wonder Bread sales are also down as folks are leaning more toward whole grains than plain white break we all knew and loved in the sixties. In fact, I still love Wonder Bread—not so much Twinkies—and if it doesn’t survive, I’ll have to find another bread to whet my whistle so to speak.
There are also a lot of union problems with this company. They’ve got more than one union to deal with and none of them would provide any comments to reporters Spector or Jargon. This right here offers up a red flag—unions often make a company go south just by their demands. Unions need to go bye-bye, in my humble opinion.
Then there is the multi-company pension that’s in trouble and that’s never good and in fact, if closely scrutinized by the courts, any money spent by employee contributions could even be illegal—watch out Hostess!
The one thing I found unique about this bankruptcy is how reporters Spector and Jargon mentioned Hostess had secured “$75 million from debtor-in-possession financing.” Also known as DIP, this amazes me. The DIP in any bankruptcy is usually the owners of any company so where is this $75 million coming from? By that I mean I want names of people here. Are Mr. and Mrs. Hostess throwing in a couple mil or what?
Debtors owed money in any bankruptcy are not likely to part with more money when they are owed money unless they receive some sort of stock interest or takeover interest and the Wall Street Journal story didn’t mention this point. The DIP is an important part of any bankruptcy so who is it or who are they and why put in another $75 million?
The jokes about the preservatives in Twinkies have been around for years—yep have a Twinkie in your pantry from 1956? No problem, go head and eat it—it’s still fresh! I’m not sure if I would eat a real, real old Twinkie but I bet looking at in the package, it would still look tasty.
I also find it funny that so many big businesses can file for bankruptcy over and over again—and Hostess is a privately held company. What about the smaller business owner who only gets one chance at a possibleChapter 11 and then ultimately ends up in Chapter 7? What DIP is fighting for them? No one, the DIP is usually the owners and if they’re filing for 11, they don’t have any more money to invest so it does give me pause—where’s the money coming from and will this Hostess Chapter 22 be a success so we don’t lose Twinkies and Wonder Bread forever?
Sad times indeed! In fact, I really do wish I had a Twinkie right now, even if it was really, really old!