Last week, our blog reported on how the Eastman Kodak Company -- a photography giant and American institution -- filed for bankruptcy protection due to staggering losses largely precipitated by its failure to adapt to a changing marketplace. Now, yet another American institution -- so to speak -- is seeking bankruptcy protection.

According to news reports, Hostess Brands Inc. -- the food company behind such classics as Wonder Bread, Twinkies, DingDongs and HoHos -- filed for Chapter 11 bankruptcy last week.

For those unfamiliar with Chapter 11 bankruptcy, it typically entails a debtor proposing a plan of reorganization outlining how it will keep its business alive and pay off creditors over the course of time.

Here, Borders indicated in court documents that it plans to keep its business operations afloat with $75 million debtor-in-possession financing from a New York investment firm, and listed assets of $1 billion and debts/liabilities exceeding $1 billion.

Fortunately, the Texas-based company -- which employs roughly 19,000 people in bakeries, outlet stores and distribution centers throughout the United States -- is not planning any layoffs or closings.

Interestingly, Hostess filed for Chapter 11 bankruptcy back in 2004 and completed its restructuring/reorganization in February 2009. However, the company indicated that this implemented only "incremental change" and that further change is now needed to address outstanding labor/pension problems.

"The company's current cost structure is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules," said a company spokesperson who indicated that negotiations with labor unions are ongoing.

Industry analysts cite a variety of factors -- outside of labor issues -- that have caused Hostess to suffer staggering losses, including the high cost of ingredients, the stocking of more expensive desert options by upscale grocery stores and the failure to adapt to health/obesity concerns.

"You can't pick up a paper without reading about obesity in America," said Adam Hanft, chief executive of a New York-based brand-strategy firm. "It seems like it's pretty bad management that they can't take advantage of a trend like obesity."

Stay tuned for future developments from our San Antonio bankruptcy blog ...

Regardless of your financial situation, contact an experienced legal professional to learn more about your rights and your options under Chapter 7 bankruptcy or Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

Source:

The Los Angeles Times, "Hostess files for Chapter 11" Jan. 12, 2012