Hostess heads for ‘Chapter 22’ bankruptcy
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Hostess heads for ‘Chapter 22’ bankruptcy
Steve Chiotakis:The maker of Twinkies and Wonder Bread, Hostess Brands, today filed for Chapter 11 bankruptcy protection. The company just emerged from bankruptcy back in September.
And as Marketplace’s Adriene Hill tells us, there’s another name for filing bankruptcy twice.
Adriene Hill: Who says that bankruptcy experts don’t have a sense of humor?
You’ve heard of Chapter 11. How about Chapter 22?
Edie Hotchkiss: It’s a made-up term. It doesn’t have any real meaning in the law or anywhere else. And it’s somewhat of a joke based on firms going into Chapter 11 two times. So two times 11 is 22.
Edie Hotchkiss is a finance professor at Boston College’s Carroll School of Management.
There are a few Chapter 33s.
Hotchkiss: I think there may even be a Chapter 44 out there.
Companies bounce in and out of Chapter 11 for a couple of reasons: Sometimes it’s an industry issue, downturns causing trouble. Hotchkiss says airlines are a good example of that. Other times, that first Chapter 11 creates a tough path forward.
Steven Walt: Companies that emerge from the first Chapter 11, emerge weak.
Steven Walt is a law professor at UVA. He says companies often leave bankruptcy with a whole lot of debt, making it that much easier to get in trouble a second or third or even fourth time.
I’m Adriene Hill for Marketplace.
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