Have Doubts About Chapter 11 Bankruptcy? Just Look at Hostess Brands

Posted on July 13, 2016 at 12:00pm by
The benefits of filing for bankruptcy after job loss.

Last week, we discussed how Gawker filed for Chapter 11 bankruptcy to reorganize its debts and continue operating. Gawker is one of many businesses that have used Chapter 11 to survive. In fact, we can use Hostess Brands as an additional example of how Chapter 11 bankruptcy can save businesses drowning in debt.

Hostess has filed for Chapter 11 bankruptcy twice in its 86 years of operating. In fact, at the time of its initial filing in 2012, many people in the media made fun of Hostess by calling it a ‘Chapter 22 bankruptcy’ due to filing twice within a decade.

For those who have never entered a grocery or convenience store, Hostess is the creator of Twinkies, Wonder Bread and Ho Hos. It also has its headquarters here in Kansas City.

After emerging from its 2004 bankruptcy in 2009, Hostess continued to struggle. Issues with labor union contracts and poor sales forced the company back into bankruptcy in 2012. During its 2012 bankruptcy, Hostess shut down 33 bakeries and 565 distribution centers across the country. Almost 18,500 Hostess employees lost their jobs.

How Hostess Filed for Chapter 11 Bankruptcy and Survived

Despite two bankruptcies, Hostess will go public again by launching an IPO (initial public offering). According to Hostess, the IPO could put its value at $2.3 billion. How did Hostess survive two Chapter 11 bankruptcies?

Hostess used Chapter 11 bankruptcy to continue operations and restructure its debts. During its first bankruptcy, Hostess renegotiated labor contracts that were partially responsible for its financial troubles. In other words, Chapter 11 bankruptcy allowed Hostess time to find new ways to become profitable and to fix existing problems.

The Kansas City bankruptcy attorneys at The Sader Law Firm can help struggling businesses find solutions for discharging excessive debts.