Twinkie Maker Goes Belly Up

Hostess, which is owned by private-equity firm Ripplewood Holdings, struggled to meet interest payments as its investors sought concessions from employees of the Irving, Tx., -based company. Nearly 80% of Hostess workers had unionized contracts, according to previous reports from The Wall Street Journal.

Burdened by debts, pension liabilities and the increased operating efficiency of competitors, Hostess 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.

In January company arranged for $75 million in debtor-in-possession financing for its bankruptcy stay, drawing money from hedge fund Silver Point Capital and existing lenders with a first lien claim on its assets. That loan will remain in place as Hostess winds down business.

While in bankruptcy, Hostess Brands had pinned its hopes on improving its employee cost structure, and modernizing the company's plant and equipment.

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 (GE) GE Capital division, Monarch Alternative Capital and Silver Point Capital also provided hundreds of millions in rescue financing. However, even after exiting bankruptcy, the company struggled with employee costs and a lack of competitiveness.

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 (KFT), Campbell Soup (CPB) and private-equity firms Blackstone (BX) and KKR (KKR), the Journal reported.

-- Written by Antoine Gara in New York

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