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Harry & David Bankruptcy Tarnishes Its Brand

03/29/2011

And so another brand is diminished by the actions of a buyout firm. Crippled by debt piled upon it by its Wall Street owners, storied Oregon fruit company Harry & David has filed for bankruptcy protection.

The filing Monday in Delaware Bankruptcy Court had been widely expected after the troubled firm — known for its Moose Munch candied popcorn and 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.

The firm, founded by the late New York buyout king Bruce Wasserstein, financed the deal by issuing $250 million in bonds — and used some of the proceeds to pay itself back all of the cash it had put up to buy the company.

“All of the Wasserstein original investors got their money out of it and left Medford with a shell of a company with gigantic debt,” said Charles Jaeger, a professor at Medford’s Southern Oregon University business school.

The interest payments on the debt have been staggering. In the first half of its current fiscal year, Harry & David posted $6.2 million in operating profits, but its debt service totaled $10.9 million.

This is a blow to the entire Medford community and to direct merchants worldwide who long admired Harry & David’s exquisitely presented product, attention to quality and exemplary customer service.

 

 

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