1800mattress in flux
Sale deal, bankruptcy both on table
By Larry Thomas -- Furniture Today, March 23, 2009
NEW YORK — Less than a week after executives of 1800mattress.com announced they had agreed to sell the company, two mattress producers and a landlord filed a petition in U.S. Bankruptcy Court seeking to force the retailer into Chapter 7 bankruptcy.
The petitioners, who include Sealy and Comfort Solutions licensee Blue Bell Mattress, contend the retailer is not paying its bills. By filing the petition, they are asking the court to order the company to liquidate its assets and distribute the proceeds to creditors.
A few days before the petition was filed, the retailer said it had signed a letter of intent to sell the company to an investor group led by mattress industry veteran Ken Mazda. However, the petition is likely to delay completion of the deal because other potential buyers have emerged.
“A number of individuals and investor groups are interested in the long-term opportunities of investing in our brand, and we expect to continue to work with these groups to explore our options,” said a spokesman for 1800mattress.com.
The spokesman said the bankruptcy petition would have no effect on day-to-day operations. “We have the right assortment and depth of inventory to satisfy our customers' needs. No one should see any disruption of service.”
According to documents filed with the bankruptcy court, Sealy says it is owed $1.16 million and Blue Bell says it is owed $471,409. The third petitioner, 6225 Jericho Turnpike LLC, says it is owed $17,452 in rent.
The retailer has until March 27 to respond to the petition.
The company said Mazda assumed responsibility for day-to-day operations when the letter of intent was signed. He would become CEO upon closing.
Under terms of the proposed deal, Napoleon Barragan, who founded the company more than 30 years ago, would be a consultant and advisor to the new company and would focus on international business development.
Founded in 1976 as Dial-A-Mattress, the company pioneered the concept of selling mattresses over the phone. It blanketed the New York region with advertising containing its now-famous toll-free number and the slogan, “Leave off the last 's' for savings.”
The retailer later franchised the concept and also branched out to pursue Internet retailing and traditional retail showrooms.
1800mattress now has about 40 brick-and-mortar stores — mostly in the New York market — in addition to its telephone and Internet businesses.
The company features mattresses from Sealy, Serta, Simmons, Tempur-Pedic and King Koil, and also carries products such as futons, adjustable beds and Murphy beds.
Mazda is best known for building Nationwide Discount Sleep Centers into a 60-store retail powerhouse in the Philadelphia market in the 1980s and 1990s.
He and his partners sold the chain to Mattress Giant in 1999. Mazda joined the management team of 1800mattress.com last summer.
The bankruptcy petition does not involve a 1800mattress.com franchise group that covers markets in New England, Philadelphia, central and southern New Jersey and Florida. Bob Klein, president of the franchise group, said his company is independent of the franchisor and is unaffected by the petition.
“We are not involved in any way, and it is business as usual for our customers,” Klein said. “There is no impact whatsoever on our ability to purchase product, make sales and deliver to our customers.”
He said his company has separate contracts with Sealy, Serta, Simmons, Spring Air and Tempur-Pedic and is current on all payments. His company has its own call center in suburban Boston and its own fleet of delivery trucks.
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