Harry & David files for bankruptcy
Harry & David, famous for its Oregon comice pears and its fruit-of-the-month boxes, has been struggling to make payments on debt that was loaded onto the company when it was bought by a New York private equity firm in 2004.
The financial downturn also affected the company's sales.
"There’s no doubt that the debt payments are a huge factor," said Renee Fellman, an Oregon turnaround expert who has been following the company. "But on top of that, they have declining margins, increasing competition and many reports of bad customer service -- including yours truly."
Under Chapter 11 protection, Harry & David will continue operations -- sending out its fruit boxes as planned -- and exchange its bonds for equity in the company.
Wasserstein & Co., the private equity owners of Harry & David, tried to turn things around last year by laying off hundreds of employees and bringing in new, and somewhat controversial, outside executives.
That strategy appeared to come up short as sales during the recent holiday period were down from a year earlier. In February, Wasserstein brought in a new chief executive from the same restructuring firm that was handling the Lehman Bros. bankruptcy, Alvarez & Marsal. And on March 1, the company did not make interest payments on its nearly $200 million in debt.
“We believe that entering into this agreement provides the best opportunity for Harry & David to restructure its balance sheet on an expedited basis, strengthen its operations and create long-term value while continuing to provide customers with the highest-quality products and service,” said Kay Hong, the new chief executive brought in from Alvarez & Marsal.
The company's decline has been devastating for the southern Oregon town of Medford, where Harry & David was founded as a family company a century ago and where the company has been the largest private employer.
-- Nathaniel Popper
Photo: Bloomberg News