Simmons Files Pre-Packaged Chapter 11 Bankruptcy
November 16, 2009Simmons Bedding Co. has filed a pre-packaged Chapter 11 bankruptcy plan of reorganization
In connection with the filing, Simmons Bedding's parents, Simmons Co. and Bedding Holdco Inc., along with all of its domestic subsidiaries have also filed chapter 11 cases in the U.S. Bankruptcy Court in Delaware. Today's filings do not include Simmons' Canadian and Puerto Rican operations.
Under the plan, Simmons and its subsidiaries expect to continue normal operations throughout the reorganization process and the company's senior secured bank lenders, trade vendors, suppliers and employees will be paid in full. Simmons expects to emerge from Chapter 11 within 60 days.
As previously announced in September, the plan provides for the acquisition of Simmons Bedding and all of its U.S. and foreign subsidiaries, as well as its parent Bedding Holdco Inc., by certain affiliates of Ares Management LLC and Teachers' Private Capital, the private investment department of the Ontario Teachers' Pension Plan (collectively, "AOT"). Ares Management is an asset manager that also holds an equity stake in bedding competitor Serta.
The plan and related transactions will allow Simmons to substantially reduce its total debt obligations from about $1 billion to about $450 million, allowing the reorganized company to emerge with a stronger balance sheet and increased financial flexibility.
"Today's filings are a necessary step toward the successful conclusion of our financial restructuring," said Stephen G. Fendrich, Simmons Bedding's president and chief operating officer. "We do not anticipate any changes in our daily operations as a result of this filing. Our manufacturing plants will operate as usual and our customers should continue to expect the same great service and quality they have received prior to and during this restructuring process."
Today's filing follows the completion of the solicitation process of lenders and note holders. The approval of the plan by the company's lenders and note holders is evident in voting results with 100 percent of the claims voted by Simmons Bedding's senior lenders, 94.5 percent of the claims voted by Simmons Bedding's 7.875% senior subordinated note holders and 98.8 percent of the claims voted by Simmons' 10 percent discount note holders voted to accept the pre-packaged plan.
Together with the termination or expiration of all waiting periods under applicable anti-trust and competition regulations in the U.S. and Canada announced by Simmons Oct. 29, the result of the solicitation satisfies another one of the key conditions for consummating the transaction with AOT. With these conditions met, today's filing marks one of the final steps in the restructuring process. The transaction remains subject to confirmation of the pre-packaged plan by the Court, as well as customary closing terms and conditions.
"We have received tremendous support from our stakeholders throughout this process," Fendrich said. "This demonstration of confidence in the solid fundamentals of our business is due in no small part to our employees and our dealers, whom I wish to thank again for their continued dedication to our business. I'm especially pleased that the pre-packaged plan submitted to the Court provides for full payment to our employees as well as our senior lenders and suppliers. Having received overwhelming support from our lenders and note holders through our recently completed solicitation process we now look forward to quickly emerging from chapter 11 and completing the transaction that will allow Simmons Bedding to continue its legacy of operational excellence, innovation, and customer satisfaction."
As of today's filing, Simmons Bedding has about $50 million cash-on-hand and will continue to be able to satisfy customary obligations associated with its daily operations through the confirmation process. As previously announced, Simmons Bedding has also arranged for a $35 million debtor-in-possession revolving credit facility with certain lenders, pursuant to which Deutsche Bank Trust Co. Americas will act as the administrative agent and collateral agent and Deutsche Bank Securities Inc. will act as the sole book runner and lead arranger.
In conjunction with today's filings, the company also filed customary first day motions intended to allow Simmons to operate in the ordinary course of business and protect its associates and suppliers during the restructuring. Among these motions are requests to continue the payment of wages, salaries, and other employee benefits as well as to continue to honor its customer programs and consumer warranties.
