Serta Simmons Bedding, one of the largest bedding manufacturers and retailers in the U.S., on Monday filed for Chapter 11 bankruptcy at the U.S. Bankruptcy Court for the Southern District of Texas, per court documents. Assets and liabilities are each listed as ranging from $1 billion to $10 billion.
On Tuesday, the company also filed suit to uphold the terms of a 2020 loan that has been the subject of legal tussles with other lenders. That loan shored up its finances in the height of the pandemic, reducing its debt by about $400 million, lowering its interest expense, and bumping its cash position to $300 million, per other court documents.
The company, whose holdings include DTC mattress company Tuft & Needle, said in a press release that it has a restructuring support agreement with about 81% of its first lien, first out priority term loan lenders, 77% of its first lien, second out priority term loan lenders, and a majority of equity holders.
Serta Simmons said Monday that it is “operating as normal,” working with retail partners and vendors, fulfilling orders from its manufacturing facilities, and proceeding with launches from its Serta and Beautyrest brands this year.
Under its proposed agreement, its funded debt would shrink from some $1.9 billion to closer to $300 million. The company said it has received a commitment for a $125 million asset-based loan when its emerges from bankruptcy, as well as debtor-in-possession financing for another $125 million. The new financing, if approved, plus about $170 million cash on hand as of the filing date and cash from ongoing operations would support the business during Chapter 11 process, per the press release.
In a statement, CEO Shelley Huff said that this will provide the company with a “stronger financial foundation.”
“Looking ahead, we will remain focused on launching new innovations, further building a high-performing and resilient supply chain and expanding the commercial side of our business to meet demand for our trusted brands and products,” Huff said.
But in court documents the company warned that resolution of the ongoing disagreements over its pandemic-era loan is “critical” to the success of its Chapter 11 process. The filing marks the eighth default on loans topping $1 billion outsanding in the last 12 months, and the largest since Cineworld’s default in September, according to Fitch analysts Eric Rosenthal and Judah Gross. It’s also Serta’s second default since the height of the pandemic, they said in emailed comments.