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IRVING, Texas—Hostess Brands Inc. filed for Chapter 11 bankruptcy protection Wednesday, citing pension and medical benefit obligations as primary reasons for the move.
“The company's current cost structure is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules,” a Hostess news release said. “Those issues, combined with the economic downturn and a more difficult competitive landscape, created a worsening liquidity situation that prompted the need for a reorganization.”
In its filing with the U.S. Bankruptcy Court in New York, Irving, Texas-based Hostess listed seven of its top eight largest unsecured creditors are union pension funds, headed by the $4.85 billion Bakery & Confectionary Union & Industry International Pension Fund in Kensington, Md., which it owes about $944.2 million, according to the filing. The second-largest creditor is the $19.8 billion Central States, Southeast and Southwest Areas Pension Plan in Rosemont, Ill., which is owed about $11.8 million.
Hostess has faced contributions of $130 million a year to 40 multiemployer pension plans, made up of participants from 12 separate unions, to keep up with pension obligations, according to a source close to Hostess.
“These pension plans burden the company with crippling costs,” a Hostess spokesman said in an interview.
Kevin Olsen is a reporter for Pensions & Investments, a sister publication of Business Insurance.