When Hostess, one of the most famed manufacturers of baked goods in the U.S., filed for Chapter 11 bankruptcy in 2012, many people in New York and, really, all across the country feared that the company’s iconic treat — the Twinkie — would disappear forever. Given that Twinkies had long been the source of jokes that made the cake sound like an indestructible and nonperishable item, this seemed impossible. Twinkies were not literally indestructible, of course; but Twinkies did have a 26-day shelf life under the old Hostess Brand company.
Hostess was purchased by a couple of equity firms and relaunched as a new company with the same name. The firms got a hold of it through the Chapter 11 bankruptcy process.
Now “new” Twinkies are here, and everyone can rest assured that the recognizable golden yellow cake has not been lost. A few changes have been made to the Twinkie, including the shelf life limit. It was upped to 45 days, though this aspect was implemented under the old Hostess name as it was going through bankruptcy. The new Twinkies will also be slightly lighter and contain fewer calories than the original version.
The reintroduction of Twinkies is nice; but the big reminder this story delivers is that bankruptcy for a business does not have to be a death nail. Chapter 11 bankruptcy can be used by the insolvent company in a number of ways. It can give the business some breathing room; some time, if you will, to financially reorganize themselves. It can give the company the chance to seek an exit strategy or to implement a new business plan. And it can be used to help sell a company to another firm looking to rebuild the organization.
Source: Associated Press, “‘New’ Twinkies weigh less, have fewer calories,” Candace Choi, July 16, 2013