Debt Financing and Bankruptcy Essay Example | Topics and Well Written Essays - 750 words

Debt Financing and Bankruptcy - Essay Example This chapter is distinguished from other filed chapter as it is the only chapter that allows companies to refinance and reorganize to prevent final liquidation. A company may refinance itself by getting loans thorough debt financing mode. This help to get the required money to finance the daily operations of the company and also pay other costs like salaries, pension and medical cost. Restructuring involves changing the mechanisms through which company operations are conducted. This involves reducing the number of employees and performance contracting to ensure efficiency in production and also reduce operation cost (Usatoday, 2012) The debt trouble that the company is experiencing is caused by the following factors. First, the annual sales of the company is about $2.5 billion ant this is not enough to cater for the rising medical benefit and pension costs of its 19000 unionized employees who operates in over thirty states are .In addition the company has had trouble attracting customers who have migrated to more healthier whole grain foods that do not put them at risk of suffering from obesity and other cardiovascular diseases. Furthermore the cost of ingredients-sugar and flour has increased significantly decreasing the total revenue accrued by the company. Hostess main competitors include Bimbo Bakeries, Kraft Inc and Sara Lee. The company has a debt of over $860 million with Industry International Pension and Fund Bakery & Confectionary Union as the main unsecured creditors (Guardian, 2012). The debt financing option that were available included getting loans from bank, taking goods (ingredients) on credit and then and then repaying the debt later after sale, creating more shares that are later sold to cater for the financial needs selling bonds and partnering with other well established companies that can inject in new ideas