Road to financial stability may clear for Harry & David

A $310 million financial bailout approved by the U.S. Bankruptcy Court in Delaware could give Harry & David the leverage to pull out of bankruptcy, the Medford-based company announced Tuesday.

After smoothing out objections by creditors, the court approved a $100 million line of credit and a $55 million loan for Harry & David Holdings Inc., one of the largest employers in Southern Oregon.

In addition to the line of credit and loan, Harry & David received approval from the court for another $100 million in exit financing as well as a $55 million stock offering intended to help the company emerge from Chapter 11 bankruptcy protection.

A committee representing unsecured creditors came to an agreement with Harry & David over the loans. The creditors, who provide goods and services but don't have any assets in the company, had earlier balked at fees being charged for the loans for the financial bailout. The higher the fees, the less the creditors might receive.

A representative from Lowenstein, Sandler PC, one of the law firms representing the creditors, could not be reached for details on how much the creditors would receive as part of the agreement.

Wasserstein & Co, the parent company for Harry & David, is one of many lenders that have agreed to prop up Harry & David, but also wanted to charge fees and for the loans. Wasserstein also wanted additional shares in Harry & David as part of the restructuring plan.

The unsecured creditor committee includes a major landlord, a candy company, printing company and the U.S. Pension Benefit Guaranty Corp., a federal pension protection agency. In objecting to the initial proposal, the committee members said Wasserstein would be "the primary beneficiary" of the bankruptcy by receiving $5 million in fees for agreeing to buy any unsold stock in addition to fees of $625,000 annually to maintain its management services.

Creditors also pointed out the private equity firm had made significant profits on its investment in Harry & David while saddling the company with $200 million in bonded debt.

Details of the loans were made public by Sard Verbinnen & Co. and Rothschild Inc., two firms working with Harry & David during the Chapter 11 negotiations.

Harry & David officials said the restructuring and financial agreement will give it the tools to get out of bankruptcy.

"We look forward to implementing our reorganization plan in order to emerge from this process as a stronger, healthier and more competitive company," Kay Hong, chief restructuring officer and interim chief executive officer, stated in a prepared release.

Harry & David will now be able to pay off creditors throughout the United States.

The deal comes at a price for Harry & David workers. As part of its bankruptcy proposal, Harry & David has proposed terminating its pension plans — one for upper executives and another for more than 3,000 current and former employees. The Pension Benefit Guaranty Corp. has said it would likely cover most of the pensioners' losses.

Harry & David is a speciality retailer specializing in gift-quality fruit, gourmet food products and other items marketed under its own brand as well as Wolferman's and Cushman's. It sells its products online, through phone sales and in a national network of Harry & David retail outlets. The company continues to sell its products during the bankruptcy proceedings.

Last year, Harry & David posted losses of $57.6 million and reported difficulty paying off loans.

In Feb. 2010, Bill Williams, the company's chief executive officer for 21 years, was ousted, leaving with a $5 million compensation package, according to the Securities and Exchange Commission.

Reach reporter Damian Mann at 541-776-4476, or e-mail dmann@mailtribune.com.


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