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Twinkie Maker Goes Belly Up

Stocks in this article: KFT

NEW YORK ( TheStreet) -- Hostess Brands, the maker of Wonder Bread, Ding Dongs, Ho Ho's, Sno Balls, Drakes Cakes and Twinkies, will liquidate its operations after the snack maker was unable to solve a labor dispute with its union employees and exit bankruptcy .

The Irving, Tx.,-based company has asked a White Plains, N.Y., judge for permission to file for a liquidation to sell the company's property, plant and equipment and shut down for good. Such a move will likely cost job losses for most of the Hostess's 18,500 workers and end a storied history for the company.

After filing for a second bankruptcy within the last decade in January, Hostess management and its unionized workers were unable to negotiate new pay and benefit packages, which could have kept the company in business, the company said in a Friday statement.

Earlier in November, Hostess's Bakery, Confectionery, Tobacco Workers and Grain Millers International Union employees went on strike to protest what were severe cuts to pay and benefit packages, after 92% of the union's workers rejected a new salary plan.

In response to the strike, Hostess closed some of its plants permanently, and company management gave workers an ultimatum -- end the strike by Thursday night or the company would shutter its doors for good.

On Thursday evening, Hostess determined that too few employees had returned to work for the company to remain in business. The liquidation will close 33 bakeries and over 500 distribution centers, Hostess said.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," Chief Executive Gregory Rayburn said in a statement.

"Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders," Rayburn added.

When filing for bankruptcy in January, Hostess Brands cited an inability to renegotiate crippling pension and benefit plans with its unionized employees, which made the near 20,000 worker strong company vulnerable to cash shortages and an economic downturn.

For the company, which has made popular American breads and desserts since the 1930s, the January filing was 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. Friday's liquidation signals there will no third shot for the company.

On Thursday, BCTGM International Union president Frank Hurt said the company's demise was the "result of nearly a decade of financial and operational mismanagement," after hedge funds took control of the company and tried to make union workers bear the brunt of Hostess's financial challenges.

"What's happening with Hostess Brands is a microcosm of what's wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor," A.F.L.-C.I.O. President Richard Trumka added in a seperate statement.

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