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Farewell, Twinkies

The Don said:
With respect to the last point. Interest rates are so low at the moment that many of these companies are able to struggle along continuing to pay their interest but unable to actually make any difference to the company itself.

These are termed "Zombie Companies" and some economists claim that they are having a significant drag on the economy as a whole.

Here's a commentary article from the Financial Times:

http://www.ft.com/cms/s/0/7c93d87a-58f1-11e2-99e6-00144feab49a.html#axzz2K0pMDOK2
Click to expand...


They really are "zombie companies" as they represent tied-up and misallocated capital. And this is particularly true of (very) small, mom-and-pop businesses -- if you add more costs via 99-weeks unemployment sillyness or Obamacabre taxes or onerous new regulations and they will just go under and disappear taking that embedded capital and those jobs straight into the DC-inspired sewer.
 
balrog666 said:
They really are "zombie companies" as they represent tied-up and misallocated capital. And this is particularly true of (very) small, mom-and-pop businesses -- if you add more costs via 99-weeks unemployment sillyness or Obamacabre taxes or onerous new regulations and they will just go under and disappear taking that embedded capital and those jobs straight into the DC-inspired sewer.
Click to expand...

I wonder if the mom and pop businesses really do represent a macro-economic issue. I realise that there are a large number of them but the amount of capital tied up in each is probably relatively small.

If they do fold (the way it was explained in the Financial Times article it's more likely to be a rise in interest rates that triggers the failure, not the causes you suggest) then this could be a good thing.
 
The Don said:
I wonder if the mom and pop businesses really do represent a macro-economic issue. I realise that there are a large number of them but the amount of capital tied up in each is probably relatively small.

If they do fold (the way it was explained in the Financial Times article it's more likely to be a rise in interest rates that triggers the failure, not the causes you suggest) then this could be a good thing.
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Sometimes it just takes one more straw. Any straw will do.

And I am not sure why driving such companies out of business is a "good thing" in the current economic environment, perhaps you could explain that?
 
balrog666 said:
Sometimes it just takes one more straw. Any straw will do.

And I am not sure why driving such companies out of business is a "good thing" in the current economic environment, perhaps you could explain that?
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The premise is that the zombie companies are tying up capital that could be used more profitably.

From this BBC article:

http://www.bbc.co.uk/news/business-20262282

But there are concerns that banks are keeping these no-hope companies alive in order to avoid taking further, potentially significant losses - and this, in turn, could be holding them back from new lending, which is needed to boost the economy.
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So the suggestion is that if the banks take a hit now they can move on and make loans to more viable companies.
 
balrog666 said:
They really are "zombie companies" as they represent tied-up and misallocated capital. And this is particularly true of (very) small, mom-and-pop businesses -- if you add more costs via 99-weeks unemployment sillyness or Obamacabre taxes or onerous new regulations and they will just go under and disappear taking that embedded capital and those jobs straight into the DC-inspired sewer.
Click to expand...

Ahh, yes, those driven out by collusion in markets, monopolistic and oligarchic practices by large retailers, hassling of suppliers, and the like are now "zombies", which should be raided for what remains of them.

Yeah, got it.

No.
 
The Don said:
The premise is that the zombie companies are tying up capital that could be used more profitably.

From this BBC article:

http://www.bbc.co.uk/news/business-20262282

So the suggestion is that if the banks take a hit now they can move on and make loans to more viable companies.
Click to expand...

And driving small retailers out of business, causing yet more employement, in an environment that is already hostile to small business owners and entrepreneurs, is definitely the best way to solve the problem. :rolleyes:
 
The Don said:
The premise is that the zombie companies are tying up capital that could be used more profitably.

From this BBC article:

http://www.bbc.co.uk/news/business-20262282



So the suggestion is that if the banks take a hit now they can move on and make loans to more viable companies.
Click to expand...


That is indeed rather silly.

As I pointed out previously, the capital simply disappears as it is lost, it doesn't get reallocated to anything more efficient, productive, or profitable.

Just as with Hostess -- the receivers may recover a few dollars for brand names and real property but several hundreds of millions of equity dollars are now simply lost (along with all of those union jobs).
 
balrog666 said:
That is indeed rather silly.

As I pointed out previously, the capital simply disappears as it is lost, it doesn't get reallocated to anything more efficient, productive, or profitable.

Just as with Hostess -- the receivers may recover a few dollars for brand names and real property but several hundreds of millions of equity dollars are now simply lost (along with all of those union jobs).
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Well with Hostess the understanding is that hundreds of millions of dollars will be recovered.

In any case, with a zombie company the money is effectively lost in any case (given that it's tied up in a company which is barely servicing its loans). If the company goes out of business at least the debt can be written off (as opposed to lurking on the bank's balance sheet as a risk) and whatever can be recovered can be used more effectively.
 
luchog said:
And driving small retailers out of business, causing yet more employement, in an environment that is already hostile to small business owners and entrepreneurs, is definitely the best way to solve the problem. :rolleyes:
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The theory is that these businesses are effectively out of business anyway, it's just cheap money that's allowing them to limp along but not grow. One of the reasons why the economic climate is hostile to entrepreneurs is that the banks currently have a large portfolio of loans to these zombie companies which prevents them from making loans to companies which may grow.
 
Hostess retirees, price of Twinkies

I know someone who is retired from Hostess. I haven't seen him in a while but I certainly hope whatever retirement benefits he is getting will not be lost.

IMO the company priced their twinkies too high. In small C-stores they cost around $1.39 for a small package. I surmise people who eat that stuff want a larger package for the price.
 
So, what's the tally so far? 410 mil for the snack cakes, 360 mil for Wonderbread.... Have they recapped the "brutal beating" the investors took, yet?

ETA: And there's a 27.5 mil pending bid for the competing brand - Drake's.

Oh, and Metropoulos is a winner in the food wars. Some of the unions will be kept on - and I'm betting the AEBU (Amalgamated Ebil Bakers' Union) is one of the ones that stays. He needs to re-tool and get up to production speed in short order. Twelve weeks to break in new bakers and helpers ain't going to work. (Besides, wouldn't Metropoulos and Apollo actually be grateful to the bakers for pushing the old management team over the cliff?)

I think the Teamsters may be left holding the bag. Their contract was one of the most problematic because of the multiple brands/multiple deliveries requirement. They no longer have the bread/rolls AND snacks to deal with, so the two individual buyers can essentially renegotiate their deals or even take on the Teamsters if they feel like it.
 
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Foolmewunz said:
So, what's the tally so far? 410 mil for the snack cakes, 360 mil for Wonderbread.... Have they recapped the "brutal beating" the investors took, yet?
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Doubtful, since that's far less than the billions owed. They lost $1.1 billion in 2012 alone.

Foolmewunz said:
Oh, and Metropoulos is a winner in the food wars. Some of the unions will be kept on - and I'm betting the AEBU (Amalgamated Ebil Bakers' Union) is one of the ones that stays.
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What do you base that on? AFAIK they bought only the brand, not the manufacturing plants.
 
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