Sleepy's buys Discounters

Larry Thomas -- Furniture Today, November 12, 2012

RICHMOND, Va. - Top 100 retailer Sleepy's was confirmed as the winning bidder for the 80-store Mattress Discounters chain last week in U.S. Bankruptcy Court here.
     Court officials said Sleepy's paid $11.9 million for the company, outbidding the Connecticut-based investment firm Longroad Asset Management in a court-supervised auction.
     Mattress Discounters isn't in bankruptcy, but parent company Room-Store Inc. is in the midst of Chapter 7 liquidation proceedings. RoomStore owned 65% of the bedding retailer, but an agreement between the bankruptcy trustee and Mattress Discounters CEO Ray Bojanowski, who owned the remaining 35%, allowed the trustee to sell all the retailer's equity.
     Sleepy's plans for the newly acquired stores weren't immediately clear, but the company has been aggressively expanding into Virginia and North Carolina in recent months.
     It also wasn't clear if Bojanowski would remain with the company.
     Sleepy's, based in Hicksville, N.Y., has more than 800 stores and was ranked ninth on Furniture Today's latest Top 100 Furniture stores listing. The company had sales of $846 million in 2011, according to Furniture/Today estimates.
     RoomStore's stake in Mattress Discounters was long considered its most valuable asset, and the sale was the culmination of months of sparring between the trustee and Bojanowski, who had argued that his 2010 agreement with RoomStore gave him the sole right to purchase the bedding retailer in the event of a RoomStore bankruptcy filing.
     The dispute also involved Salus Capital, who is owed about $3.21 million from a debtor-in-possession loan made to RoomStore while it was operating under Chapter 11 bankruptcy protection.
     RoomStore filed for Chapter 11 bankruptcy in December 2011, and the case was converted to Chapter 7 liquidation on July 24.
     The dispute was settled with a complex agreement involving bankruptcy trustee Lynn Tavenner, Bojanowski and Salus that allowed the trustee to sell all of Mattress Discounters equity for at least $10 million. Bojanowski would have been able to buy the 65% of the company he didn't own if the minimum bid hadn't been met.
     In earlier court filings, Tavenner said she believes the DIP loan can be repaid in full after the sale is closed.