Harry & David, Southern Oregon's largest employer, is expected to file for Chapter 11 bankruptcy protection as soon as today, according to reports Sunday by The Wall Street Journal and The New York Times' DealBook.
Known worldwide for its fruit-filled gift baskets, the Medford company plans to file what is known as a "prearranged" Chapter 11 deal with creditors in Delaware bankruptcy court to reorganize its finances, according to The New York Times, which attributed the information to "people briefed on the matter."
UBS AG and Ally Bank would provide Harry & David with roughly $100 million in "so-called debtor-in-possession financing" to keep up operations during bankruptcy protection, according to The Wall Street Journal. Bondholders would contribute another $50 million to $55 million in bankruptcy financing, The Wall Street Journal stated.
The deal would "convert (Harry & David's) bond debt to equity" and "raise additional capital through a new stock sale that creditors would likely have special rights to participate in," The Wall Street Journal reported.
Harry & David Chairman Steve Heyer did not return a phone call from the Mail Tribune late Sunday seeking comment. (Correction: Steve Heyer's title has been corrected in this story.)
The news did not come as a surprise.The 77-year-old company has struggled to weather the global recession as consumers scrimped on the company's luxury gourmet snack offerings. It had to turn to creditors to prop it up and amassed nearly $200 million in short- and long-term obligations in the process.
Meanwhile, there were waves of employee layoffs, saturating Jackson County in economic anxiety as unemployment stood stubbornly at about 12 percent. Harry & David retail stores also closed across the country.
During the holidays, the retailer failed to shore up adequate sales and lost the ability to borrow money under the terms of a $105 million revolving credit line and therefore, couldn't cover the bills for operations and debt payments, The Wall Street Journal reported.
The company recently breached terms on the revolving credit line and defaulted on a $7 million interest payment owed to bondholders, but remained in "a grace period" until Thursday, The Wall Street Journal stated.
As of year's end, Harry & David had about $198 million in bond debt in addition to its revolving-credit line, The Wall Street Journal reported. That credit line will continue under the restructuring plan, the newspaper quoted its source as saying.
Reach reporter Paris Achen at 541-776-4459 or e-mail email@example.com.