December 3, 2023

DealBook: Harry & David Files for Bankruptcy

6:46 a.m. | Updated
Harry David, the purveyor of fruit-filled gift baskets, filed for bankruptcy protection on Monday morning as part of an effort to reorganize its troubled finances.

The company filed what is known as a “prearranged” Chapter 11 plan in Delaware bankruptcy court, under which bondholders would take over by converting their debt holdings into equity.

The prearranged Chapter 11 plan, which could eliminate virtually all of Harry David’s $198 million in bond debt, is meant to avoid a protracted struggle in bankruptcy court as it continues trying to rebound from its recession-related woes.

Harry David’s existing lenders, UBS and Ally Financial, have agreed to provide about $100 million in debtor-in-possession financing to help it continue operating in bankruptcy. Bondholders would provide another $55 million.

UBS and Ally have also agreed to provide $100 million in exit financing, while bondholders have agreed to backstop a $55 million rights offering meant to raise additional capital, people familiar with the matter told DealBook.

“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,” Kay Hong, chief restructuring officer and interim chief executive, said in a statement on Monday.

Harry David’s plans come as no surprise. The company has been working with advisers — the investment bank Rothschild, the law firm Jones Day and the consulting firm Alvarez Marsal — on possible reorganization options. And last month, Harry David warned in a regulatory filing that it might need to file for bankruptcy.

Earlier this month, the company skipped a $7 million interest payment on some of its bonds, as it negotiated with its creditors.

Driving much of Harry David’s troubles was a weak holiday season. For the quarter ended Dec. 25, sales fell 1.8 percent, to $262.1 million, compared with $267 million in the period a year earlier. Gross profit dropped 20.6 percent, to $104.2 million.

The company’s owners include Wasserstein Company, the personal investment vehicle of the late financier Bruce Wasserstein. The firm, along with Highfields Capital Management, took over the gift basket company in 2004 for $253 million.

Wasserstein Company, which also owns some of Harry David’s bonds and is expected to retain some equity, has already recouped 1.25 times its initial investment, one of the people briefed on the matter said.

Harry David’s Chapter 11 petition

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