Deep Fried Twinkies No-More? Bakery Files Bankruptcy
Twinkies maker files for bankruptcy
NEW YORK (Reuters) -- Fairgoers indulged in thousands of deep-fried Hostess Twinkies this summer, but it may not have been enough to keep the struggling Interstate Bakeries Corp. in the black. The Twinkies maker, which also makes Wonder Bread, filed for bankruptcy Wednesday after struggling with more than $1.3 billion in debt, high costs and weak demand for bread products amid the popularity of low-carbohydrate diets.
The largest U.S. wholesale bakery also accepted the resignation of James Elsesser as chairman and chief executive, according to the Chapter 11 filing in the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City.
The company named Leo Benatar as nonexecutive chairman and Antonio Alvarez as chief executive, according to court papers. Alvarez is managing director of the turnaround firm Alvarez & Marsal, which was hired to assist Interstate in restructuring.
"The company has a very high cost structure burdened by some unfavorable union contracts, and ultimately this company has to get their costs in order to survive, and we just don't know if they can do that," said Janney Montgomery Scott analyst Mitchell Pinheiro, who has a "hold" rating on the shares.
Interstate said it would seek court approval for a debtor-in-possession financing facility not to exceed $200 million and that it has received a $200 million financing commitment from JPMorgan Chase Bank.
Shares of Interstate plunged 62% in early morning trading on the Inet electronic brokerage network. The stock, which traded as high as $16.24 six months ago, fell to $1.25, down $2.02 from its close at $3.27 on Tuesday on the New York Stock Exchange. The shares were halted for pending news by the NYSE on Wednesday.
The company said this month its lenders had allowed additional borrowing on its revolving credit line, but the facility required the company to file its fiscal 2004 financial statements by Sept. 26. The company's fiscal year ended May 29.
Interstate has delayed filing its annual report twice because of uncertainty over its upcoming financial results and whether it will be in compliance with certain debt covenants during its fiscal year 2005.
Kansas City-based Interstate, along with other food companies, has been hurt by decreased demand for bread and pastries due to the popularity of low-carb diets.
"This is a business that has been in steady decline for the last eight years and they sometimes blame Atkins or blame other consumer trends," said Pinheiro. "But the bottom line is that this company hasn't innovated ... and when they have innovated they've generally been one step late."
Furthermore, the U.S. Securities and Exchange Commission launched an accounting probe into the company in July, looking into how it set workers' compensation and other reserves.
The company, which operates bakeries and outlet stores and distributes its products to retailers, said it expects day-to-day operations to continue as usual during the reorganization and has sought authority from bankruptcy court to pay employees and honor benefits without interruption or delay.
Thank god. How many Deep-Friend things do we need?
I know neither is healthy, but i love both wonder bread and twinkies.