Groups vie for Sleepmaster
One plan has National Bedding acquiring stake
By Larry Thomas -- Furniture Today, November 11, 2002
Wilmington, Del. — The judge overseeing Sleepmaster's Chapter 11 bankruptcy case is expected to decide which of two reorganization plans will be sent to the bedding producer's creditors for their approval.
Sleepmaster, Serta's largest licensee, is seeking court approval of a plan to restructure internally and emerge from Chapter 11 with significantly lower debt.
However, the court-appointed unsecured creditors committee contends a proposed $185 million buyout by National Bedding Co., another large Serta licensee, would be a better deal for creditors and provide a more stable future for the company.
Attorneys for both sides are set to argue their cases Thursday, Nov. 14 before Judge Mary Walrath, who must decide which plan will be presented to creditors for a vote. Court documents don't indicate when Walrath will issue her ruling or say how long creditors will have to vote.
If National Bedding and Sleepmaster are merged, the new company would control 79% of Serta's voting stock, according to the unsecured creditors committee filing.
Lawyers for the committee and Sleepmaster didn't return telephone calls seeking comment, and officials at Serta declined to comment.
Sleepmaster, which filed for bankruptcy protection in November 2001, is proposing to combine all operating units into a single entity, which would have some $130 million in new financing. Citicorp Venture Capital would remain the company's principal owner, but court filings didn't make it clear what stake it would have in the reorganized company.
Under Sleepmaster's proposal, most unsecured creditors and bondholders would be allowed to choose between a cash settlement of claims or an equity interest in the new company. Creditors with claims of $5,000 or less would receive 50% of the amount owed.
In court documents, Sleepmaster said it considered the offer from National Bedding, but "determined that a standalone restructuring plan would create significantly more value to the creditor constituencies."
Under the creditors-committee-backed National Bedding buyout plan, National would own 85% of the merged companies, and creditors would get a 15% stake and warrants to purchase an additional 5%. Creditors also would get about a 15% stake in a separate holding company that would own Serta's Toronto licensee, which is part of the Sleepmaster organization but not part of the bankruptcy filing.
Under the committee's proposal, Sleepmaster's existing management would not be retained. National Bedding would name four members of the new company's five-member board, and the fifth would be a representative of Sleepmaster's creditors.
Court papers said National Bedding had sales of $234.9 million in 2001 and $187.1 million for the first nine months of 2002. Sleepmaster reported sales of $356.7 million in 2001 and $201.1 million in the nine months.
