The emergency funding that
The mattress manufacturer filed for bankruptcy on Monday, after clashes with lenders including Apollo Global Management Inc. left it with no other options for cutting its debt load while grappling with an economic slowdown that is crimping sales. Serta
When the pandemic was raging in 2020 and the US economy had broadly shut down, Serta Simmons got $200 million of rescue financing to help it stay in business. The funding came from a group of lenders including Eaton Vance and
Lenders excluded from that financing, including Apollo and Angelo Gordon & Co., responded by
The mattress maker, assembled over a decade by private equity firms, faced heavy debt maturities this year. Alongside its Chapter 11 petition, Serta filed
The Serta litigation was the beginning of a series of clashes between lenders and companies with heavy debt loads that were
Now Serta is trying to fix its financial difficulties with a bankruptcy plan that calls for repaying high-ranking lenders with new debt and stock in the restructured company,
Loans pushed back in the repayment line in 2020 — more than $860 million of debt — would get a single-digit share of the stock in post-bankruptcy Serta. The plan also calls for paying the company’s continuing vendors in full, as long as they agree to favorable trade terms.
Nearly all of its top unsecured creditors are suppliers, with the top one listed owed more than $17 million, the filings show. The plan requires bankruptcy court approval and could change.
The creditor group has agreed to provide $125 million in the form of an asset-based loan to help the company fund itself in bankruptcy. Serta has also secured a commitment of $125 million in the same form once it exits bankruptcy.
The firm listed assets of $1 billion to $10 billion and liabilities in the same range in its petition. The company’s debt, which stems from a roughly $3 billion leveraged buyout by
Serta is working with advisers Weil, Gotshal & Manges, Evercore Group and FTI Consulting, according to the statement. Gibson Dunn & Crutcher and Centerview Partners are advising creditors, while Ropes and Gray are working with Advent.
The mattress giant’s start can be traced back to the 1870s along the shores of Lake Michigan. There, Simmons first started producing coil spring mattresses,
The firm grew over the next century until it filed for bankruptcy during the fall-out of the financial crisis. Soon after, the firm combined with competitor Serta to establish the new company, Serta Simmons. In 2018, the company acquired Tuft & Needle, a maker of mattresses that get packaged in boxes and shipped directly to consumers’ homes.
Today, the firm is one of the largest mattress companies in the US, accounting for 19% of annual bedding sales, according to court papers. It operates 21 manufacturing facilities across the US and Canada and sells mattresses at 2,200 independent retailers.
But selling mattresses has grown more difficult, according to Serta. Rising interest rates have weighed on consumer spending, and the company has faced higher raw material costs and supply chain disruptions.
The case is Serta Simmons Bedding LLC,
(Updates with detail from prior litigation from first paragraph)
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Beth Thomas, Dan Wilchins
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