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Harry & David files for bankruptcy after going through the Wall Street ringer

Discussion in 'BBS Hangout: Debate & Discussion' started by raj87, Mar 30, 2011.

  1. raj87

    raj87 Member

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    Just another example of Wall Street greed, plain and simple. The town of Medford, Oregon is now doomed thanks to these unethical jerks.

    http://www.latimes.com/business/la-fi-harry-and-david-20110329,0,6839865.story

     
  2. pgabriel

    pgabriel Educated Negro

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    am i supposed to care about this. its a typical buyout by an equity firm of a business that looks like it was doomed anyway
     
  3. rtsy

    rtsy Member

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    Pear greed is the worst kind of AMERICAN greed.
     
  4. raj87

    raj87 Member

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    What moved me to post this thread, was the fact that in 2005, Wasserstein used the proceeds of the $245 million in bonds to pay itself back (the company was purchased for $230 million, with Wasserstein putting up $82 million), along with an $82.6 million dividend. Later that year, they took out another $19 million. H&D is now a debt riddled shell of its former self as a result, hence outraged.
     
  5. JuanValdez

    JuanValdez Member

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    I never understood how they stayed in business charging $847 for each piece of fruit. Can't say I'll miss them when they're gone.
     
  6. pgabriel

    pgabriel Educated Negro

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    Yeah i get that, but that's what the firms do. You've seen Wall Street right. they go in eat the remains. they seem to rarely have intentions on turning this companies around ufortunately
     
  7. raj87

    raj87 Member

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    However, H&D would have likely weathered the storm, had it not been crippled with so much unnecessary debt. Furthermore, it is simply unacceptable what these firms do.
     
  8. JuanValdez

    JuanValdez Member

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    I think this is where you find the genesis of all this trouble:

    The founding family cashed out. They're living it up in the Bahamas now. I'm not sure how they are any less greedy than Wasserstein. Once they sold it, it was just another asset spinning off cash to whoever owned it. So, now the new owners screwed it up and it's not producing cash for them anymore. I'm not sure what the big deal is. The family got theirs and these bondholders like WellsFargo are going to lose their bet. Meford will have to look elsewhere for employers. You and I will have to look elsewhere for delicious but overpriced fruit. No biggie.
     
  9. rimrocker

    rimrocker Member

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    I live in Medford and it is a big deal here. A few comments:

    Looks like they will try to get out from under their pension obligations, which will do more damage to more people than reducing operating costs as a lot of retirees around here were long-time H&D employees. Hopefully, the Bankruptcy judge and the PBGC can work something out.

    For the past few years, there has been a concerted effort to fire older employees before retirement and those making decent wages. Part of their problem is that they have a bunch of young inexperienced people making around minimum wage doing jobs older professionals used to do.

    That dynamic extends to the warehouse/call center/packaging operations where the biggest personnel cuts took place and working conditions are so abysmal that people only work there as a last resort... really oppressive stuff, like limited bathroom visits, impossible production measures, etc. Unfortunately, the economy here has been a last resort kind of thing, so they are constantly churning through workers.

    In short, a bunch of assholes are running/ruining the company.

    They've so boxed themselves in with the debt and trying to sueeze the juice from every turnip that they have no flexibility to change their business model or even the capacity to consider planning for such a change.

    Oh well, I get great discounts at the local store. Picked up a spiral sliced ham for $14 the other day and Moose Munch is cheap.
     
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  10. bnb

    bnb Member

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    i think it is a big deal.

    It's the Leveraged Buyout fiasco of the 80's 2.0. The private equity firms, or others buy up the business and load it with debt, leaving it no margin for a downturn. The founders get paid, the advisors get paid, and everyone else who profits when a transaction gets done gets paid very well. But there's no real economic advantage for the business or the community. The motivation is often the transaction itself. Not the long term benefit of the company. Again....gain for the few, and risk for the many.

    Don't know much about pears. Or designer fruit. But this same thing happened with other businesses, including Whistler mountain, where the 2010 Olympics were held. The companies are more then just assets spinning off cash. Their demise has huge impacts to communities, supporting businesses, and families and employees. They're not simply MBA case studies. And the other stakeholders are the one's getting screwed when a sound company is put at unreasonable risk because the reward system encourages a reckless transaction.
     
  11. pgabriel

    pgabriel Educated Negro

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    i think the point is and i maybe wrong that this business was in trouble anyway. as juan said, the debtors took a chance and they are the only real losers. unfortunately business do go out of business for legit reasons, this one may have been going under anyway
     
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  12. JuanValdez

    JuanValdez Member

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    I think you're right that Wall St is just doing what it does, but maybe we're too cold about all this. There aren't a lot of employers in small towns, so losing one is a burden on a population that has come to rely on it. In the long-term, it's business as usual, but there'll be pain in the short to medium term for that town. Still, I'm sure WellsFargo and other bondholders didn't want this thing to turn to lead -- if this outcome was really so inevitable, why did they loan the money?
     
  13. bnb

    bnb Member

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    I suspect Wells Fargo, and/or their advisors, got huge placement fees for the debt, or somehow spun it off to others. The financial industry salesmen are very good at their jobs ;). They also believe their own hype.

    I don't think they purposely made bad loans -- but I find that often the rewards for getting a transaction done are so much greater (and concentrated to the decision makers) then the risks of failure (which can often be pawned off).

    I'm also rather surprised you could build a $250M company by overcharging for fruit. Or that such an idea would be germinated in a place like Medford, OR.
     
  14. pippendagimp

    pippendagimp Member

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    sounds like what the Fed's doing to the US govt
     
  15. raj87

    raj87 Member

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    Kindly note that Harry and David was still experiencing modest growth when the buyout occurred. Their total oustanding debt was 0. They actually had$6.2 million in operating profits, but its debt service totaled $10.9 million.
     
  16. raj87

    raj87 Member

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    ^ In the 1st half of their current fiscal year.
     
  17. Rocketman1981

    Rocketman1981 Member

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    Great post and some insight about the Private Equity market and its flaws and short-term thinking.

    They're not long-term owners of businesses and need turnover as they collect their asset charges as performance (if any) fees.

    Everyone invests in PE firms looking backwards at returns and don't realize the space is pretty crowded killing margins and having most firms feel the pain of the 'Winners Curse'.
     
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  18. thadeus

    thadeus Member

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    I want prison sentences for these people.

    If I go to jail for failing to pay a traffic ticket on time, then people like this (and others of their ilk) should all be in prison.

    I consider these people criminals, worse than any small-time burglar or car thief, and if we're not going to punish Wall Street criminals, then how is our punishment of ANY criminal legitimate?
     
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  19. raj87

    raj87 Member

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    Great internet posts by bnb, thadeus and rimrocker.:cool:
     
  20. MoonDogg

    MoonDogg Member

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