Harry & David survival in doubt
Harry & David Holdings Inc, the mail-order food company known for its fruit baskets and Moose Munch snacks, said on Tuesday it may go out of business unless it can agree with creditors on a plan to restructure its debt.
In the wake of disappointing holiday sales, the company said it expects to be unable to finance continuing operations unless it secures new capital and restructures its obligations, and plans to open talks with bondholders and other creditors on a recapitalization plan.
Harry & David said that because its efforts may not succeed, there is substantial doubt as to our ability to continue as a going concern.
The company last month said it had retained Rothschild Inc and the law firm Jones Day to explore a recapitalization.
Harry & David's owners include affiliates of private equity firm Wasserstein & Co and hedge fund Highfields Capital Management, which paid $252.9 million for the company in 2004.
Representatives of Harry & David, Highfields and Wasserstein were not immediately available for comment.
Standard & Poor's on January 20 downgraded Harry & David's credit rating to CC, a low junk grade.
It called the Medford, Oregon-based company's capital structure unsustainable, and said a restructuring could lead to a Chapter 11 filing under the U.S. bankruptcy code.
According to its website, Harry & David's roots date to 1910, when founder Samuel Rosenberg acquired 240 acres of pear orchards in southern Oregon.
Named for Rosenberg's sons, the company said it established the Fruit-of-the-Month club in 1938.
Harry & David separately said net sales in its fiscal second quarter ended December 25 fell 2 percent to $262.1 million. Quarterly operating profit fell 56 percent to $26.2 million.
The quarter typically accounts for more than half of annual sales.
Harry & David last month said that despite cutting costs and improving products and packaging, sales and margins in the holiday season were disappointing, as it offered significantly greater-than-expected discounts.
(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr and Tim Dobbyn)
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