Harry & David cleared to emerge from bankruptcy

* Bankruptcy judge approves restructuring plan - lawyer

* Lenders to take control of company

* Unsecured creditors see small recovery

NEW YORK, Aug 11 (Reuters) - Harry & David Holdings Inc won tentative court approval for its reorganization plan on Thursday, clearing the way for the gift basket maker to emerge from bankruptcy under the control of senior noteholders.

U.S. Bankruptcy Judge Mary Walrath, at a hearing in Wilmington, Delaware, said she was prepared to approve the reorganization, according to Brad Erens, a lawyer for Harry & David. Walrath had not entered an official order on the court docket by late Thursday.

Harry & David filed for Chapter 11 protection in March, citing falling sales and competition from "big-box" retailers such as Wal-Mart Stores Inc (WMT.N).

The Medford, Oregon-based company filed its reorganization plan in May after winning support from most bondholders and other creditors.

That plan calls for the exchange of $200 million in senior debt for equity in a restructured company. Unsecured creditors would recover about 10 cents on the dollar over a two- to three-year period, Erens said.

UBS AG (UBS.N) and Ally Financial, which lent Harry & David $100 million to keep operating while in bankruptcy, will continue to finance the company upon its emergence, said Jesse Austin, a lawyer for UBS.

The case is In re Harry & David Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 11-10884. (Reporting by Nick Brown; Editing by Ted Kerr)