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What Was Old Could Be New

Bankruptcy is an opportunity for a fresh financial start. We talk frequently about the consequences and benefits of debt-relief through filing for bankruptcy. Although individuals and businesses file for Chapter 7 bankruptcy every day, it is not often a household name is included among those aiming to wind down their debt — and their business.

In late November, the U.S. Bankruptcy Court for the Southern District of New York approved a motion by 82-year old Hostess Brands, Inc. to wind down its business and liquidate assets. Listing over $982 million in assets and $1.43 billion of debt, Hostess produced well-known snack brands: Twinkies, Ding Dongs and Sno-Balls. While these familiar brands were long a mainstay of lunch boxes, company profits declined as concern for healthy snacks rose along with the costs of raw materials and union labor.

In early November, Hostess suffered a crippling labor strike, and is now seeking liquidation. Like consumers facing Chapter 7 liquidation, Hostess now seeks bidders to purchase its remaining assets — which are sizeable. U.S. Bankruptcy Judge Robert Drain noted the liquidation process should move quickly, with the realization that brands lose value every day they are off grocery shelves.

While job loss in this economy is serious, some workers could be rehired if brands begin production through a different owner. For those mourning the loss of Twinkies, the liquidation process may relieve a long-beleaguered company of its debt, pay down creditors and bring Twinkies once again to a grocery store near you.

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