For multi-channel gourmet food retailer Harry & David, a sour apple is likely to be its Fruit-of-the-Month for March. After closing more than 50 of its retail stores since the beginning of 2011, the company filed a voluntary Chapter 11 bankruptcy protection petition in U.S. Bankruptcy Court in Delaware on March 28.
Harry & David is the sixth retail bankruptcy so far this year. In addition to the high-profile Borders Group, apparel retailers Anchor Blue, Orchard Brands and Rugged Bear and electronics retailer Ultimate Electronics have all filed for Chapter 11 protection in the first quarter of the year.
Harry & David Holdings, which also markets under the Wolferman's and Cushman's brands, intends to use the Chapter 11 process to facilitate a financial and operational restructuring while continuing to operate on a business-as-usual basis. As part of the pre-arranged restructuring, supporting noteholders have agreed to backstop a $55 million rights offering providing Harry & David with the necessary equity financing to emerge from bankruptcy.
In addition, the company is seeking approval to enter into a $100 million first-lien debtor-in-possession (DIP) revolving credit facility that would be provided by the company's existing secured lenders, and a $55 million second-lien DIP term loan provided by the holders of the company's senior notes.
"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," said Kay Hong, interim CEO and chief restructuring officer, in a statement.
This statement also noted that Harry & David currently operates 70 retail stores, compared to the 122 stores it operated on December 25, 2010. This information came from the retailer's quarterly financial report that was released February 8, 2011. For the 13 weeks that ended December 25, 2010, net sales decreased 1.8% to $262.1 million, and at that time the company had a cash balance of $66.9 million and accounts payable of $57.9 million, compared to a cash balance of $108.5 million and accounts payable of $32.5 million on December 26, 2009.
For related content see: Borders Files for Bankruptcy, Closes 200 Stores