Harry and David Holdings Inc. said Monday it plans to leave its bankruptcy status behind late this summer.

Harry and David Holdings Inc. said Monday it plans to leave its bankruptcy status behind late this summer.

The Medford-based gourmet food and gift company, along with its subsidiaries, on Monday filed a joint plan of reorganization and disclosure statement in Delaware bankruptcy court. Harry & David, which filed for Chapter 11 bankruptcy protection in March, said the plan has the support of both the official committee of unsecured creditors and the holders of approximately 81 percent of the company's bonds.

Kay Hong, chief restructuring officer and interim chief executive officer, said the filing is a vital step in the reorganization process.

"Our employees, customers, suppliers and other supporters have been instrumental in our ability to reach this important milestone, and we deeply appreciate their support," Hong said in a statement.

As part of its bankruptcy plan, Harry & David has proposed terminating its pension plans.

Employees also have gone through a series of layoffs and pay reductions for some. The federal Pension Benefit Guaranty Corp. has said it would likely cover most of the pension losses.

Last year, Harry & David posted losses of $57.6 million and earlier this year was unable to make required loan payments on its debt.

That debt was primarily accumulated by its parent company, Wasserstein & Co., a private equity firm that purchased Harry & David in 2004 and then sold bonds to cover its costs and make a profit estimated at more than $100 million.

The bonded indebtedness combined with an economic downturn to push Harry & David's financials into the red.

In Monday's news release, the company said it expects to emerge from its restructuring with a significantly improved balance sheet and with substantially less debt.

Under the plan, the company's $200 million of outstanding public notes would be converted into equity in the reorganized company. The debt proved too much of a burden for the company when the economy soured and business-to-business gift sales — a key element in the company's record revenue years — took a nose dive in the latter portion of the past decade.

Under the plan, a cash infusion backed by a group of existing noteholders would generate another $55 million after the company emerges from bankruptcy proceedings. That would allow Harry & David to pay off obligations from its $55 million post-petition term loan.

Once the company emerges from Chapter 11 protection, a $100 million revolving loan commitment to finance operations will replace its present $100 million credit line.

Although Wasserstein & Co. will continue to hold two board seats, and a say in appointing a new chief executive officer, who also will be a director, there will be two additional bondholders on the board. Under the reorganization plan it would take a supermajority of four board members to approve selling the company or one of its units.

A supermajority also is required to declare dividends, acquisitions or possible equity and debt decisions.

The company expects to hold a hearing on the plan in June, after which it will solicit approval from the necessary creditors.

Reach reporter Greg Stiles at 541-776-4463 or email business@mailtribune.com.