Judge delays ruling in 1800mattress.com sale
By Larry Thomas -- Furniture Today, June 1, 2009
NEW YORK — A U.S. Bankruptcy Court judge has delayed a final ruling on the sale of retailer 1800mattress.com until this week.
Judge Dennis Milton told lawyers involved in the case that he probably would issue a ruling early this week on the retailer's proposed sale to sleep shop chain Sleepy's for $25 million.
Milton made the decision after hearing several hours of arguments Thursday for and against the sale. Some of the strongest objections were raised by Consolidated Mattress, a 1800mattress.com franchisee that contends it would be put out of business if the sale is approved because Sleepy's has said it plans to reject the franchise agreement.
Consolidated has filed a damage claim of $11.4 million with the court. Any money paid to the franchisee is expected to come from the $25 million sale price.
Sleepy's, which is proposing to acquire 1800mattress.com through an entity called Newco Trading, told the court the sale represents the best possible outcome for unsecured creditors since they would receive 85% of what they are owed — an unusually high payout in a Chapter 11 bankruptcy reorganization.
In a court filing, Newco said 1800mattress.com and the unsecured creditors committee “will vigorously dispute” Consolidated's damage claim.
The Sleepy's bid was the highest received at an auction held earlier this week. Court documents indicate five bidders, including Sleepy's and Consolidated, were present, but the other bidders were not named.
Under terms of the proposed sale, Sleepy's has agreed to hire current employees of 1800mattress.com and assume the lease on the bankrupt retailer's existing headquarters in Long Island City. However, Sleepy's has said it does not plan to keep open the bricks-and-mortar stores operated by 1800mattress.com.
Bethpage, N.Y.-based Sleepy's has about 700 stores in the eastern U.S. It is ranked No. 11 on Furniture/Today's Top 100 list with estimated 2008 sales of $831 million.
1800mattress.com, which pioneered telephone sales of mattresses, has been operating under Chapter 11 protection since March.
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