Harry & David files for Chapter 11
March 28, 2011 12:52 PM
This morning Harry & David, No. 84 in the Internet Retailer Top 500, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Harry & David, which sells online at HarryandDavid.com, Wolfermans.com and HoneyBell.com, filed for bankruptcy protection in order to secure $100 million in exit financing from its current lenders and an additional $155 million of debtor-in-possession financing from its senior and junior note holders, the company says.
Harry & David, which generated web sales of $175.5 million in fiscal 2010, will continue normal operations as it restructures, says interim CEO Kay Hong. In February Harry and David named Hong as temporary CEO and its chief restructuring officer. Prior to joining Harry and David, Hong was a managing director with Alvarez & Marsal Holdings LLC, a corporate turnaround and restructuring firm based in San Francisco. Harry & David hired Alvarez & Marsal to assist in restructuring the company after announcing that it was not able to finance continuing operations.
“Harry & David is an iconic brand, and we believe this is an important first step to position the business for long-term profitable growth,” says Hong.
Harry & David has accumulated loans of approximately $198.2 million from Wells Fargo Bank and owes vendors such as Federal Express Corp., Google Inc. and IBM Corp. $1.18 million, $872,661 and $562,171, respectively, according to the claims of creditors listed in the bankruptcy filing.
Harry & David’s investment banker is Rothschild Inc. Jones Day has been retained as legal counsel and Alvarez & Marsal will act as financial advisor. “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,” says Hong.
Harry is the latest well known retail brand to enter—or exit—bankruptcy. In February Blockbuster Inc. (34) and Borders Books Inc. (194) filed for chapter 11. Also in February Oriental Trading (No. 57) emerged from bankruptcy after restructuring nearly $500 million in debt.