Sleep Innovations in Pre-packaged Chapter 11
By Brent Felgner -- Home Textiles Today, 10/13/2008 12:00:00 AM
Wilmington, Del. —
A hearing was held Oct. 6 on the series of first-day motions involving the Chapter 11 bankruptcy filing of memory foam sleep product manufacturer Sleep Innovations.
According to an affidavit by new president and ceo Richard Heller, who assumed the leadership post in August, the company is presenting the filing as a pre-packaged Chapter 11. It has reached an agreement in principal with its first-tier secured lenders to file a reorganization plan and disclosure statement within 30 days that will be aimed at an emergence by February 2009.
Heller is a turnaround executive with the Carl Marks Advisory Group who was already working with Sleep Innovations finance.
The company said it expects the bankruptcy will have no impact on its day-to-day business.
Court documents indicate that the company will seek to convert much of its debt to new equity. In a statement, Sleep Innovations said it had obtained commitments from the company's lenders for up to $35 million in debtor-in-possession financing.
The company blamed its deteriorating condition on the rise in costs for petrochemical raw materials, and declines in the economy and housing markets.
Privately held Sleep Innovations had sales of $432.6 million in 2007. It is known for, among other things, its NovaForm brand and its Kathy Ireland line of foam pillows and mattress toppers. Recently under private equity owners the company has been moving toward becoming vertically integrated, purchasing Advanced Urethane Technologies last year for $88 million.
The company lists first-tier secured debt of $285 million, consisting of a $15 million and $30 million revolver, and $240 million of term debt. Second-tier secured debt totals $340 million and it stated it has $34 million in trade debt. The 30 largest unsecured creditors account for $16.3 million in debt, led by Dow Chemical Co., with $3.6 million; BASF, owed $2.9 million; and Standard Fiber, owed $2.2 million.
Heller said that over the last nine months, Sleep Innovations sought numerous alternatives to deal with the mounting financial crisis that the company faced, including the sale of some or all of its assets. He indicated that the company simply ran out of time and decided to seek bankruptcy protection.
In addition to its branded products, West Long Branch, N.J.-based Sleep Innovations also produces private label products for Costco, Sam's, Sears, Target and Kohl's.
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