Hostess Brands, the bankrupt maker of popular junk food brands, like Twinkies, Ho Hos, Devil Dogs, and Wonder Bread, announced on Friday that it has asked for federal bankruptcy court’s permission to wind down its operations. The decision came a week after the company’s union workers went on a strike.
The Bakery, Confectionery, Tobacco Workers, and Grain Millers Union announced a strike last week that affected about 70 percent of Hostess’ production units across the United States. The ailing company had asked employees to sign a new labor contract. The contract allowed Hostess Brands to cut workers’ salary by 8 percent in the first year, 3 percent in the next three years, and 1 percent in the final year of the five-year agreement.
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The company responded to employees’ strike by permanently shutting down three factories. Then it gave union workers the deadline of 5 pm Thursday to return to work. The Irving, Texas-based company said today that not enough employees returned to work before the given deadline. Hostess Brands CEO Gregory Rayburn had given employees strict warning that if they didn’t come back, Hostess would no longer be an operating concern.
The company said all the 18,500 of its employees will lose their jobs after the liquidation. Hostess Brands told US Bankruptcy Judge Robert Drain in New York that it will close operations and sell assets to the highest bidders. That means its popular products will find a new life under a new owner.
“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” said Hostess’ chief executive Gregory F. Rayburn. Hostess has filed for bankruptcy twice since 2004. It took the company four-and-a-half years to emerge out of the first bankruptcy filed in 2004. The company filed a second bankruptcy in January of this year.
Union president Frank Hurt said that the company ruined itself with “nearly a decade of financial and operational mismanagement”, and now the management was trying to make workers the scapegoats.
Hostess Brands is currently controlled by a consortium of investment firms, including Monarch Alternative Capital and Silver Point Capital.