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Mattress Firm Owner Working Hard to Dodge Bankruptcy

Mattress Firm parent Steinhoff International Holdings is hoping the second time’s the charm.

Steinhoff is trying hard to avoid a bankruptcy filing and on Friday updated its debt restructuring plan.The company worked out an initial support agreement in December with creditors in connection with debt relief, but that was rejected by the majority of its shareholders at a March meeting. The new support agreement will give shareholders 20 percent of the company. Creditors will own an 80 percent stake.

Steinhoff has set a shareholders meeting on May 10 to vote on the updated plan.

The company is a global retailer that once owned over 40 brands across more than 30 countries following an aggressive mergers and acquisitions strategy. Its holdings include a 45 percent stake Mattress Firm in the U.S. and a 79 percent holding in apparel retail Pepco in Europe.

Mattress Firm was taken private by Steinhoff for $3.8 billion in 2016. The bedding retailer filed for bankruptcy in 2018, and emerged one month later after it shuttered nearly 700 stores. It initially filed for an initial public offering in January 2022, but on Jan. 9 of this year, Mattress Firm filed a request with the Securities and Exchange Commission to withdraw its IPO.

While Steinhoff in October said it was “monitoring market conditions,” it also said it was exploring strategic options for the bedding retailer.

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The mattress sector has been struggling, as has the home sector. Purple Innovation in March posted a revenue drop in the fourth quarter of 22.1 percent, and reported losses that widened to $70.2 million. And last month, Serta Simmons said it will close three factories following its Chapter 11 petition for bankruptcy court protection that was filed in January. Mattress Firm is no exception to the sector’s troubles. The firm’s balance sheet is highly leveraged, adding to its struggles.

If the trouble at Mattress Firm wasn’t enough, Steinhoff found itself at the center an international financial scandal involving intercompany loans. The loans were part of an accounting scheme that resulted in a misrepresentatlon of profits. Some brands were sold off to address its debts. The restructuring agreement that’s on the table represents, in part, an effort to compensate retail investors for the share price drop due to the accounting scandal.