Harry & David Files For Bankruptcy

Crippled by debt piled upon it by its Wall Street owners, storied Oregon fruit company Harry & David has filed for bankruptcy protection.

According to a story in the Los Angeles Times, the filing Monday in Delaware Bankruptcy Court had been widely expected after the troubled firm — known mainly for its pricey fruit baskets — missed a $7-million interest payment earlier this month.

Weak sales during the crucial holiday season hurt Harry & David, as consumers still smarting from the economic downturn shunned luxuries such as the company’s famed pears, which retail for about $4 each. Increased competition from gourmet food stores and high-end supermarkets further cut into sales.

But some analysts said the mountain of debt put onto the century-old company as part of its 2004 buyout by New York private equity firm Wasserstein & Co. proved the difference, giving Harry & David no room to maneuver during tough times.

Under Chapter 11 protection, Harry & David will continue sending out its fruit boxes and operating its 70 retail stores. The company’s bondholders, including Wells Fargo, will convert the $200 million in debt they hold into equity and will become the new owners. As part of the deal, Harry & David will receive $155 million in loans from its current creditors, including UBS and Ally Financial, to fund operations. Those creditors will also provide as much as $100 million to help the company exit bankruptcy.

The story of Harry & David began in 1910, when an entrepreneur named Samuel Rosenberg traded his Seattle hotel for orchards in southern Oregon that grew the distinctive fleshy red and green Comice pears. After his sons, Harry and David Holmes, took over, they began marketing the pears as high-end gifts and sold them to affluent city folk. Based in Medford, OR, the company prospered.

The family sold the firm to RJR Nabisco in 1986. It changed hands a few more times before being purchased by Wasserstein & Co. in 2004 for $253.9 million.