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Twinkie Maker Hostess Files for Bankruptcy

NEW YORK (TheStreet) -- Hostess Brands, the maker of Wonder Bread, Ding Dongs, Ho Ho's, Sno Balls, Drakes Cakes and Twinkies, has filed for bankruptcy after being unable to manage liabilities like unionized pension plans and a large debt stock.

For the company, which has made popular American breads and desserts since the 1930s, the filing is its second trip into bankruptcy. In 2004, the company formerly known as Interstate Bakeries went bankrupt and stayed in administration for over four years until it re-emerged as Hostess Brands in 2009.

Hostess, which is owned by private-equity firm Ripplewood Holdings, is struggling to meet interest payments as investors seek concessions from 19,000 employees, who have 80% unionized contracts according to reports from The Wall Street Journal.

Burdened by debts used for acquisitions and pension liabilities, Hostess reportedly suspended payments on union pensions in December and was struggling to make interest payments on a $700 million loan. In its bankruptcy listing, Hostess Brands claimed between $500 million and $1 billion in assets and more than $1 billion of liabilities. The company also listed the Bakery & Confectionery Union & Industry International Pension Fund as its biggest unsecured creditor with a $944.2 million claim.

Hostess Brands carries additional liabilities after multiple acquisitions and owes millions in additional creditor payments. The company is now arranging $75 million in debtor-in-possession financing from its lenders, according to the Journal.

When Hostess Brands emerged from a 2004 bankruptcy, it fought a 2007 bid from Mexican baked goods giant Grupo Bimbo and Ron Burkle of the Yucaipa Cos.

It exited bankruptcy in 2009 in a deal financed by Ripplewood Holdings, which received a controlling stake in the company for a $130 million capital commitment. General Electric's (Stock Quote: GE) GE Capital division, Monarch Alternative Capital and Silver Point Capital also provided hundreds of millions in rescue financing.

In 2010, Forbes ranked it the 167th biggest private company in the U.S., and at the time of its bankruptcy exit the company staffed 22,000 employees, according to a press release. Currently, the company has 19,000 employees and an estimated $2 billion in annual sales, according to its Web site. The Journal reported that Hostess' 2011 annual losses may widen to $340 million.

Hostess Brands's popular Twinkies dessert was invented in the 1930s by the Continental Banking Company. Initially Twinkies had strawberry and banana fillings. During World War II, a shortage and rationing of bananas forced Continental Bakeries to switch the filling to vanilla, a turning point in American junk food lore.

Nearly a half billion Twinkies are reportedly made every year and former President Bill Clinton put a Twinkie in a time capsule, the company said on its Web site.

Continental Banking had a history that traced back to the 1840s until a 1995 merger with Hostess' predecessor Interstate Bakeries, which valued the company at $330 million. Recently, the company looked to divest assets like its Mrs. Cubbison's brand, which it sold to Sugar Foods for $12 million in 2011, but was unable to sell other businesses to buyers like Kraft (Stock Quote: KFT), Campbell Soup (Stock Quote: CPB) and private-equity firms Blackstone (Stock Quote: BX) and KKR (Stock Quote: KKR), the Journal reported.

Hostess was definitely one of the pioneers of unhealthy snack foods, but they are not at all the only ones. Check out MainStreet's roundup of The Worst Fast Food for Kids to see what other foods will have an adverse effect on your waistline!

Read More:   bankruptcy, food
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