Hostess Brands, America’s biggest bakery, is on the verge of filing for bankruptcy again — perhaps as early as next month, The Post has learned.
Staying out of Chapter 11 is proving tough for the Twinkies maker, a source said, adding the question now is whether it will be a pre-packaged bankruptcy or not.
“We are working hard to keep it out of [Chapter] 11,” another source close to the months-long talks with lenders and unions said.
The tipping point: Hostess maintains it cannot afford to stay current on its $700 million in outstanding loans and keep contributing to the unions’ pension plans, sources said.
Hostess has not been paying future pension benefits since August, thereby breaking its union contracts.
Even with the pension expense savings, the company still needs more money within the next several weeks. And private-equity firm Ripplewood Holdings, which holds a controlling ownership in Hostess, will not reinvest capital unless it gets its union concessions, one source said.
“I would read that as pretty drastic,” another source said. “It’s not easy to resolve that kind of issue.”
The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, representing about half of Hostess workers, last week pulled its pension funds from a multi-employer plan, sources said.
The maker of Wonder Bread needs approval from the roughly 8,000 Hostess Teamsters workers and 8,000 Bakery Union members to break the contract.
Neither of the unions has agreed to the concession.
A Hostess worker said, “We understand that, should we pursue some form of legal action to require the company to live up to the terms of the contract, they may close, but we have come to believe that they will close anyway.
“We believe the company is poorly managed and the only hope is a complete change in management.”
Part of the trickiness now is the unions do not want to be the only ones making sacrifices to help the company.
But if the union were to agree to concessions, that would give other companies with Teamsters workers the opening to ask for a similar deal, a source following the talks said.
In a memo last month to its members, the Teamsters said, “We have not made significant progress in our discussions with Hostess management in order to reach an agreement.”
Much is at stake for Twinkie the Kid. The firm filed for Chapter 11 in September 2004 and spent 4 1/2 years there before Ripplewood in February 2009 bought it after gaining union concessions.
There is a concern that if it files again, the result could be liquidation with many of its brands, including Hostess, Wonder, Nature’s Pride, and Drake’s, sold for cash.
In that scenario, the first to be paid would likely be the company’s lenders, including General Electric, Monarch Alternative Capital and Silver Point Capital.
The unions will likely rank behind them in a bankruptcy, and Ripplewood’s equity stake would be wiped out, sources said.
Ripplewood, Hostess and the Teamsters declined to comment. The bakery union did not return calls.