Sleepmaster to pay Leggett first
By Larry Thomas -- Furniture Today, January 27, 2002
WILMINGTON, Del. — A U.S. Bankruptcy Court judge here has granted Sleepmaster's request to pay components supplier Leggett & Platt virtually all the $26 million it was owed when the bedding producer filed for Chapter 11 protection in November.
In her order, Judge Mary Walrath designated Leggett & Platt as an "essential trade creditor," which means the company's claims will be paid before those of other unsecured creditors.
"It appear(s) that the relief requested is in the best interests of the Debtors' estates, their creditors and other parties," Walrath's order read. L&P's claim will be paid over the next several months in accordance with the 120-day payment terms that were in effect with Sleepmaster, Serta's largest licensee, before it sought bankruptcy protection.
A Leggett & Platt spokesman said the company had no comment on the court proceedings.
Sleepmaster's request was approved despite a pair of strongly worded objections filed with the court. In one, a court-appointed committee of unsecured creditors dismissed the bedding producer's claim that Leggett would halt shipments if the money wasn't repaid.
"There is no rational basis for Leggett to refuse to provide product to Debtors … on a COD basis," the committee told Walrath. "Leggett enjoys a wonderful reputation in the bedding industry, and it is difficult to imagine Leggett would risk the severe damage to that reputation which would ensue by refusing to provide product to the Debtors.
"This unreasonable position will result in Leggett's enormous unsecured claim being elevated to a higher status than the claims of all other unsecured creditors, including Leggett competitors."
Leggett doesn't have a seat on seven-member creditors committee, which consists of representatives of four major Sleepmaster bondholders, foam producers Carpenter and Flexible Foam Products and ticking producer Blumenthal Print Works.
The other objection was filed by Lawrence Feinberg, president Farnsworth Fibre. He argued that granting special status to Leggett would "set a terrible precedent" and give the company an unfair competitive advantage.
"Granting this request for payment … will only solidify Leggett's control over this industry and stifle further competition," Feinberg told the court.
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