Friday, May 24, 2013
Hostess Brands, which operates a large bakery in Biddeford, is back in bankruptcy court barely two years after it emerged from a previous attempt to restructure.
The company employs about 370 people in Biddeford, said Daniel Stevenson, the city's economic development director. The company has 19,000 employees in all and operates in 48 states.
Stevenson said he met Wednesday morning with Joe Cabral, the manager of human resources at the Biddeford bakery, who said that Texas-based Hostess Brands has the money to continue operating after filing for Chapter 11, which is designed to allow a company to reorganize its debt and operations and then emerge from bankruptcy protection.
Calls to Cabral and a corporate spokesman for Hostess Brands were not returned Wednesday.
The company, then known as Interstate Bakeries, had filed for Chapter 11 bankruptcy in 2004, finally emerging in 2009 as Hostess Brands. The company said Wednesday that its previous attempt at "incremental change," including the first period in bankruptcy court, was "insufficient" to solve its financial problems.
"The company's cost structure left it poorly positioned to respond to a worsening economy, increased competition and consolidation in the industry that has given other bakery companies major economies of scale and work force advantages," Hostess Brands said in a statement.
The company said it has $75 million in financing to continue operating as it begins bankruptcy proceedings.
Hostess Brands makes products that include Twinkies, Wonder Bread and Drake's baked goods.
Stevenson said Cabral indicated that Hostess Brands has no immediate plans for any changes in the work force in Biddeford, at least in the short run.
Stevenson said that the bakery is Biddeford's fourth-largest employer, after Southern Maine Medical Center, the city of Biddeford and the University of New England. The company pays $548,000 annually in property taxes, Stevenson said.
The Biddeford bakery is Hostess Brands' only production facility in New England. The company also operates three outlet stores in the state.
Stevenson said Cabral told him that the Biddeford bakery is among the most productive that Hostess Brands operates. He also noted that it is only about 10 years old.
In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess listed about $860 million in debt, estimated assets between $500 million and $1 billion and estimated liabilities at more than $1 billion.
Hostess employees are unionized while most of its competitors aren't. As a result, Hostess has high pension and medical benefit costs.
In its statement, Hostess Brands indicated that it will start proceedings that could allow a bankruptcy judge to throw out the company's labor contracts, but also said it will continue to negotiate to try to modify those contracts.
The company blames those contracts for its inability to compete with other bakeries. It said the cost of pensions and medical benefits, along with "restrictive work rules," are the primary reasons for the bankruptcy filing.
The Associated Press contributed to this report.
Staff Writer Edward D. Murphy can be contacted at 791-6465 or at: