Obstacles still remain between Harry & David Holdings Inc. and its proposed exit from Chapter 11 court protection.

Obstacles still remain between Harry & David Holdings Inc. and its proposed exit from Chapter 11 court protection.

Lawyers representing the Medford-based gourmet food, fruit and gift company told a Delaware Bankruptcy Court judge Tuesday that opposition from the federal agency overseeing corporate pensions could derail the company's reorganization plan.

Bloomberg reported Brad Erens, an attorney for Harry & David, told U.S. Bankruptcy Judge Mary Walrath the company must either win court approval to cancel its pension plan or negotiate a settlement with the Pension Benefit Guaranty Corp. before emerging from bankruptcy.

The pension plan is underfunded by about $23.6 million, according to a Harry & David filing earlier this month. If Walrath sides with Harry & David and allows the company to cancel the pension plan, PBGC would pick up the bulk of the pension payments. Should that happen, Harry & David said PBGC indicated it would file a liability claim of approximately $45 million, based on its calculation of unfunded pension liabilities.

Bloomberg reported Walrath will hold a hearing on the pension in June or July, depending on a schedule agreed to by the parties in the next few days.

Two weeks ago, Harry & David announced it had reached an agreement with a committee of unsecured creditors, leading to court approval for the $155 million in debtor-in-possession financing along with a $100 million in exit financing from UBS AG and a plan to backstop the loan with $55 million in new equity. Existing noteholders will buy shares at $75 each when the plan takes effect, according to court filings.

The company filed for court protection in late March after posting losses of $57.6 million during calendar 2010 and defaulting on bond payments.

After a highly profitable run in the mid-2000s, the company's sales declined and it was unable to handle payments on nearly $200 million in bonds, sold to cover the 2004 purchase of the company by private equity firm Wasserstein & Co.

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