Word of Harry & David Holdings' imminent emergence from bankruptcy is good news for the company and the community, area leaders said Tuesday.
The Medford-based gift and gourmet food company set Sept. 13 for its exit from Chapter 11 court protection after U.S. Bankruptcy Judge Mary Walrath signed the final order Monday in Wilmington, Del., approving its reorganization plan.
"With the court's official confirmation of our plan, we've reached a significant milestone for Harry & David and are excited to emerge from the Chapter 11 process as a stronger company, better positioned for long-term profitable growth," said Kay Hong, chief restructuring officer and interim chief executive officer, in a statement. "We remain grateful for the unwavering support of our dedicated partners, employees and customers throughout the restructuring process."
After a steep decline in revenue during recent years, capped by a $56 million loss during calendar 2010, the company filed for Chapter 11 protection in late March. Harry & David reached agreement on a reorganization plan with holders of 81 percent of the senior notes, including New York-based equity investment firm Wasserstein & Co., which owns 63 percent of the stock.
"This is definitely a shot in the arm for the Rogue Valley," said Bill Thorndike, president of Medford Fabrication and former Portland branch board member of the Federal Reserve Bank of San Francisco.
"To pull this off in the time frame they did and to be ready for their biggest season is commendable. It means a lot with the number of job orders they have with local vendors. I don't think anybody is disappointed they are able to pull this off," Thorndike said. "Not only are we able to look forward to a great year relative to the amount of fruit, but also the ability to process and sell it. It's a double-win for us."
Mark Von Holle, Southern Oregon Regional Economic Development Inc. board president, said Harry & David's perseverance gives the community a boost during dire economic times.
"Harry & David is a stalwart in this community and they've weathered the worst economic storm we've seen in 70 years," Von Holle said. "For them to come out the other side speaks for itself and the excellent job management has done."
The reorganization plan was tentatively approved on Aug. 11, allowing the company to convert its approximately $200 million of bonds into equity in the reorganized company, generating $55 million in equity financing when the company emerges from Chapter 11. A group of existing noteholders have agreed to backstop the equity capital. Harry & David will use the capital to pay off obligations arising from its $55 million post-petition term loan. Additionally, the company has a $100 million revolving loan available to finance operations.
"This fall, we plan to build on the momentum of our Fruit of the Month Club with an outstanding pear harvest," Hong said. "We are thrilled with the new gifts that have been developed for the holiday season, available beginning in mid-September."
After getting bond-holders to agree to the plan, the chief reorganization obstacle was overcoming an objection from the Pension Benefit Guaranty Corp. PBGC's $36 million claim will get the same cash treatment as unsecured claims. Unsecured creditors supported the plan, which will pay them 10 percent of their claims in cash, with 40 percent of that paid in 2012 and the rest in 2013.
The emergence of one of the region's largest employers from financial straits is "great news," said veteran Jackson County Commissioner C.W. Smith.
"There are a lot of folks counting on those jobs, especially through the holidays," Smith said. "There's a tremendous morale factor involved, it's a big plus for the community, and this is a community that is looking for bright spots and bright signs."
Thorndike noted that plenty of vendors came up on the short end of the stick, but most will ultimately benefit from Harry & David's long-term presence.
"When you looked at the very large sums of money owed outside the area and the amount owed to Federal Express, you kind of went, 'Gulp,' " Thorndike said. "Clearly there were a lot of smaller vendors that had to walk away from the money owed them. It's tragic for people doing the landscaping and what have you, but in the long run, you'd rather have them back, operating profitably and going forward. Unfortunately, some people took the lumps and hopefully (Harry & David) can re-establish relationships with vendors and help them succeed."
Reach reporter Greg Stiles at 541-776-4463 or email email@example.com.