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The rough economic landscape has caused many companies to go bankrupt, but some only emerge from bankruptcy just in time to file again. A predecessor company of Hostess called Interstate Bakeries had filed for bankruptcy in 2004 and was just getting out of it in February, 2009, and now Hostess is seeking bankruptcy protection. At issue are legacy costs for pensions and medical benefits that have been promised to workers, but that make the company less competitive on the global marketplace.

What another Bankruptcy Means

For the 19,000 employees that work for Hostess, it may mean a restructuring, but operations should not be interrupted despite Hostess having a business presence in 49 states. For union employees, the bankruptcy proceedings will force both management and union representatives to the table in an effort to hash out a collective bargaining agreement that will make the company stronger. While management may argue that the benefits offered in the past are no longer sustainable if costs are to be cut, union membership may not be willing to give up needed medical and pension benefits they have had in the past.

Money Problems

Hostess has declared its biggest unsecured creditor to be Bakery & Confectionary Union & Industry International Pension Fund. In its bankruptcy filing Hostess estimates it owes the pension fund $944.2 million. The second largest unsecured creditor is another pension plan that is owed $11.8 million. The company’s assets only total $500 million to $1 billion. With liabilities that exceed the maximum amount of estimated assets, Hostess claims it has no choice but to file bankruptcy once again and try to reorganize. Despite the dire situation and the fact that it will have to bargain with the union to get necessary concessions to bring its cost in line, Hostess has managed to $75 million in financing to help keep it open and operating while it tries to restructure the entire company.