The article Hostess is Bankrupt…Again by David A Kapler talks about how Hostess might be liquidated because of conflicts between hedge funds and labor unions. Conflicts in a company lead to poor decision-making thus threatening organization failure (Smith, 2011). Hostess owns brands such as Ho Hos, Suzy Q’s, Ding Dongs, Dolly Madison and Drake Ring Dings. It has a debt of about $ 1billion. Creditors, unions and shareholders of this company took it to court because it has not come up with a way of restructuring its capital structure.
Silver Point Capital, Monarch Alternate Capital and Ripplewood Holding were in a Manhattan court trying to look for a solution on how they would restructure. They tried to discuss whether it was necessary to revive its businesses in order to improve its going concern. In addition, they tried to discuss how the pension plans of this company were outdated and non-beneficial to the workers of this company. Hostess has $ 2 billion dollars of unfunded pension liability. The morale of its employees has reduced since they feel that it does not care about their retirement benefits (Newton, 2009). Financial analysts argue that the fixed cost structure could be the main reason contributing to the financial losses of this company. In addition, consumers are changing their eating habits leading to a decline in the sales of Hostess brands.
Hostess also faced bankruptcy threats in 2009. Luckily, it was able to escape the threats by receiving a $ 130 million infusion from Ripplewood. Lenders and unions decide to support this company to help it escape liquidation. However, the economic recession of 2010 caused a significant increase in the prices of flour, sugar and corn. In 2011, its sales reduced by 11 percent compared to 2008. It also made a loss of about 341 million and its debt rose to $680 million (Kaplan, 2012). Ripplewood tried to encourage lenders to keep this company in business. Silver Point and Monarch gave $75 million to keep this company in business. Despite this contribution, the financial performance of this company has not improved.