Bedding company Serta Simmons is in preparation to seek bankruptcy protection as early as January, according to a report in Bloomberg.
Unidentified sources close to the situation told Bloomberg the mattress company has been in confidential talks with creditors about a restructuring plan, which may include giving certain first-lien lenders control. Those talks could change, and it’s still unclear whether Serta Simmons will need financing to fund its operation through Chapter 11.
Serta Simmons’ entire debt load of more than $2 billion matures in 2023, and its approximately $843 million first-lien term loan due November 2023 is quoted at around 9 cents on the dollar, according to data compiled by Bloomberg.
Much of that debt stems from majority private equity owner Advent International’s $3 billion buyout of AOT Bedding Super Holdings LLC in 2012.
In 2020, Serta Simmons inked an out-of-court restructuring plan with its creditors that added “super-priority” debt and dropped some lenders down in line for repayment. Some of those lenders, including Angelo Gordon & Co. and Apollo Global Management, recently sued the mattress maker and other lenders to invalidate the deal, accusing Serta Simmons of concocting an “unlawful scheme to rob” certain creditors “of their bargained-for rights,” court documents filed Nov. 3 show. The lawsuit says the “highly distressed” mattress company owes Angelo Gordon et al. $600 million of it total $1.9 billion outstanding loans from June 2020, though they’re unlikely to collect in the wake of Serta Simmons’ “unlawful” debt swap.
In September, Moody’s Investors Service downgraded Serta Simmons’ rating, based on the company’s debt and declining cash reserves.
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Home goods companies have taken a beating this year as pandemic demand has significantly softened, while at the same time, a glut of inventory has flooded stores and warehouses as supply chain snarls finally began straightening out.
Just this week, Sears filed Chapter 11 bankruptcy protection for its Sears Hometown division. And parent company of Lane Furniture, United Furniture Industries, abruptly shuttered its operation in November rather than declaring bankruptcy, as advised by its board of directors. The company is now subject to multiple lawsuits as a result of its hasty closure.
Traditional mattress companies such as Serta Simmons have felt additional pressure in recent years with the influx of direct-to-consumer and bed-in-a-box brands such as Casper, Purple and Avocado, which appeal to younger consumers with competitive pricing and easy ordering and delivery.