Serta Simmons wins confirmation of amended pre-pack Chapter 11 plan

By Sarah Lizee

Olympia, Wash., June 7 – Serta Simmons Bedding, LLC received confirmation of its amended pre-packaged Chapter 11 plan of reorganization from the U.S. Bankruptcy Court for the Southern District of Texas, according to a Tuesday evening press release.

As previously reported, the plan is centered on a restructuring support agreement that aims to cut the company’s debt to about $300 million from $1.9 billion.

The company amended the pre-packaged plan prior to the multi-day confirmation hearing after reaching settlements with consenting creditors and equity holders under the RSA, as well as the official committee of unsecured creditors.

The debtor was still unable to reach an agreement with minority lenders that had objected to the plan. The objecting lenders took issue with a 2020 transaction between the company and majority lenders that resulted in subordination of claims of other creditors. Their argument was that the plan impermissibly allows the debtors’ prepetition indemnity in favor of the majority lenders to pass through the plan unaffected, in violation of bankruptcy code. They also argued that the plan violated the absolute priority rule by allowing a $1.5 million payment to equity prior to their claims being paid in full.

“The court finds no merit in either objection,” judge David R. Jones said in a memorandum opinion signed Tuesday.

Creditor treatment

Under the plan, other secured claims and priority non-tax claims will be paid in full.

Holders of class 3 first-lien first-out claims will receive a pro rata share of new term loans equal in amount to the total amount of claims in this class.

Holders of class 4 first-lien second-out claims will receive a pro rata share of (i) 100% of new common interests issued on the effective date, less any new common interests distributed to holders in class 5 and subject to dilution by the new common interests distributed under the management incentive plan (MIP), and (ii) the total amount of new term loans less amounts distributed on account of class 3.

Because class 5 holders of non-prepetition term loan claims voted to reject the plan, each holder will receive its pro rata share of 1% of new common interests issued on the effective date, subject to dilution by any new common interests distributed through the MIP.

Subject to compliance with some requirements, holders of class 6A ongoing general unsecured claims will receive payment in full no later than the date that is 60 days from the later of the effective date and the execution of the 6A trade agreement.

Holders of 6B other general unsecured claims will receive their pro rata share of the class 6B trust interests. The trust will receive for distribution $5.75 million and certain causes of action.

Holders of intercompany claims will receive nothing under the plan.

Serta, an Advent International portfolio company, is an Atlanta-based manufacturer and distributor of mattresses. It filed bankruptcy on Jan. 23 under Chapter 11 case number 23-90020.

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