Specialist in restructuring named Harry & David CEO

Harry & David has replaced its chief executive officer for the second time in a year.

The financially troubled company announced Friday it has appointed Kay Hong, a specialist in corporate turnarounds, as its interim CEO.

Hong, a managing director for San Francisco-based Alvarez & Marsal, replaces Steven J. Heyer, who will remain as the company's chairman, a press release said.

"Kay's financial and operational expertise will complement the strengths of our existing management team ... as we finalize our restructuring plan," Heyer said in the press release.

Alvarez & Marsal, a corporate restructuring and turnaround management firm, will join financial adviser Rothschild Inc. and legal adviser Jones Day, which were hired by Harry & David in January to map out the company's plan for survival.

The Medford-based gourmet food and gift company lost $57.6 million over the last 12 months, following a $24.7 million loss from the same period the year before. The revenue shortfall left the company unqualified to receive loans from its creditors, and subsequently unable to make $7 million in interest payments, which are due to its bondholders by March 1, 2011, according to a filing with the Securities and Exchange Commission. The company laid off 100 workers around the country last week.

Harry & David's management team is "actively working with bondholders and creditors on a refinancing alternative," said Cassandra Bujarski, a spokeswoman for Sard Verbinnen & Co., a New York public relations firm hired by Harry & David.

If the company's management team cannot hash out a deal to extend its payout time with bondholders, or amend its credit agreement to gain access to a $105 million credit line, Harry & David likely will face Chapter 11 bankruptcy.

Heyer did not respond to phone calls and messages from the Mail Tribune requesting direct comment, but he outlined the company's management change to employees in an e-mail Friday, which was obtained by the paper.

In the e-mail, Heyer said the decision to appoint Hong as the interim CEO was made by himself and the company's board of directors.

"I will remain actively involved in the company's operations," Heyer wrote. "I will also help oversee the search for a permanent CEO that is based full time in Medford — a top priority given the importance and complexity of the transformational tasks at hand."

Heyer had been criticized by some in the local community for splitting his time between Medford and Atlanta, where he lives.

Hong, who will be based in Medford during the company's restructuring process, the press release said, has 13 years of experience in interim management, financial advising and advising corporate debt restructuring. She has been involved in the restructuring of such companies as Eddie Bauer Holdings Inc. and London Fog Group.

In his e-mail, Heyer said, "I am confident that with the continued hard work of our management team and our employees we will ultimately become stronger as a result of this process."

Reach reporter Sam Wheeler at 541-776-4468 or e-mail samuelcwheeler@gmail.com.

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