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Oregon Road Conditions & Cams Email Story to a Friend July 7, 2005 Bear Creek Holdings Inc. IPO possible By GREG STILES Mail Tribune Is closely held Bear Creek Holdings Inc. headed toward a public stock offering? Rumblings in the financial world suggest the Medford-based parent company of gourmet fruit gift marketer Harry and David and mail-order rose seller Jackson & Perkins is positioning itself to go public. It’s also amassing a tidy debt. It’s been little more than a year since New York equity fund investor Wasserstein & Co. acquired Bear Creek Corp. from Japan’s Yamanouchi Pharmaceutical (now Astellas Pharma Inc.). The $260 million deal was announced in April of 2004, following the end of Bear Creek’s fiscal year and closed in mid-June. In February, Wasserstein essentially refinanced its deal by going to the bond market and issuing $245 million in senior unsecured notes and floating-rate notes. In doing so, Wasserstein paid off Highfields Capital Management, a 35 percent partner in the 2004 deal. Highfields also got $30 million from the bond sale. Advertisement In late June, Bear Creek Holdings Inc., as it became known in March, said in a press release aimed at its bond holders that it expects a pre-tax loss in the range of $2.5 million to $3.5 million for the fiscal year that ended March 31. The company attributed the loss to one-time charges connected to the Wasserstein acquisition. The report was using unaudited figures with the final audit due next week. On the other hand, Bear Creek chalked up fiscal 2005 revenues of $561 million, up 7 percent over the previous year. The company said it had income of $44 million to $45 million — up approximately 25 percent over fiscal 2004 — prior to subtracting interest, taxes, depreciation and amortization. A source familiar with Wasserstein’s Bear Creek refinance efforts said the June report allowed the company to position itself for a potential Initial Public Offering because of its revenue growth. Bear Creek’s chief financial officer and chief administrative officer, Steve O’Connell, said Wednesday that the previously published anticipated revenue figures "remain valid. Otherwise, I can’t really comment on anything. I wouldn’t read anything into it." An industry insider said Bear Creek’s fourth-quarter revenue was apparently $1 million more than expected, despite higher fuel costs. Both cash liquidity and working capital improved, a result of more rigorous cash management. Harry and David retail stores also performed better than budget expectations in the fourth quarter. Institutional investors such as the National Bank High Yield Bond fund and Osterweis Strategic Income fund hold the Bear Creek bonds in their portfolios. However, Standard & Poor’s wasn’t so impressed. Troubled Company Reporter wrote in February that Standard & Poor’s Ratings Services assigned Bear Creek its B corporate credit rating. "At the same time, Standard & Poor’s assigned its ‘B-’ rating to the company’s proposed $245 million of unsecured notes to be issued under Rule 144A" allowing qualified institutional buyers to trade notes, substantially increasing liquidity of securities, according to the Troubled Company Reporter article. "The notes are rated one notch lower than the corporate credit rating due to the significant amount of priority debt in the capital structure." Troubled Company Reporter said Wasserstein paid an $83 million dividend to its shareholders from the bond proceeds. Standard & Poor’s said that its ratings reflect aggressive financial policy, a highly leveraged capital structure, the company’s participation in the intensely competitive and fragmented specialty food gifts direct marketing and retailing businesses, and the very high seasonality of its operations. It also said that the Harry and David brand is a benefit when comparing Bear Creek to gift competitors 1800flowers.com and FTD.com, Omaha Steaks, and Williams-Sonoma Inc. specialty stores, and other retail channels. Even though Wasserstein’s history is to take companies public or resell them within three to five years, Lithia Motors’ Chairman and Chief Executive Officer Sid DeBoer, who has been through an IPO process, said he would be surprised to see Bear Creek go public this summer. "I would think there are still a lot of issues to be resolved since those guys bought," DeBoer said. "I would think they’re going to open more stores first. It just depends on the markets and what kind of valuation they would get." Reach reporter Greg Stiles at 776-4463 or e-mail Bear Creek Holdings Inc. IPO possible ">[email protected] . Mail Tribune Home | Local News | Sports | Business | Obituaries | Life | Opinion AP News | Archives | Site Map | Community | Classified Copyright © 1997-2005 Mail Tribune, Inc. All rights reserved. Privacy Policy | Terms & Conditions | Website Feedback Free Music Downloads Conference Calls - $50/Month Home Security Systems Trunks, Footlocker, Trunk, Footlockers dvd-r helzberg diamonds Distance Education Diamonds Online Poker Auto Insurance Mesothelioma Home Equity Loans Slippers Student Loans tcg student loan consolidation Canadian Pharmacy Website Design & Marketing Memory Foam Mattress w2 forms Mortgage Calculator Free Home-Loan Referrals Payday Loans Air Purifiers Advertisement s