Basic bedding maker Sleep Innovations files Chapter 11
Cinde Ingram -- Casual Living, October 6, 2008
Wilmington, Del. – A hearing was scheduled this morning on the series of first-day motions involving the Chapter 11 bankruptcy filing of memory foam sleep product manufacturer Sleep Innovations.
According to an affidavit by new president and ceo Richard Heller, who assumed the leadership post five weeks ago, the company is presenting the filing as a pre-packaged Chapter 11. It has reached an agreement in principal with its first-tier secured lenders to file a reorganization plan and disclosure statement within 30 days that will be aimed at an emergence within 90 days.
Heller is a turnaround executive with the Carl Marks Advisory Group who was already working with Sleep Innovations finance.
Court documents indicate that Sleep Innovations will seek to convert much of its debt to new equity. A central part of the plan appears to rest on the company’s ability to obtain debtor-in-possession and exit financing of up to $40 million.
The company blamed its deteriorating condition on the rise in costs for petrochemical raw materials, and declines in the economy and housing markets.
Privately held, Sleep Innovations had sales of $432.6 million in 2007. It is known for, among other things, its NovaForm brand and its Kathy Ireland line of foam pillows and mattress toppers. Recently under its private equity owners the company has been moving toward becoming vertically integrated, purchasing Advanced Urethane Technologies last year for $88 million.
The company lists first-tier secured debt of $285 million, consisting of a $15 million and $30 million revolver, and $240 million of term debt. Second-tier secured debt totals $340 million and it stated it has $34 million in trade debt. The 30 largest unsecured creditors account for $16.3 million in debt, led by Dow Chemical Co., with $3.6 million; BASF, owed $2.9 million; and Standard Fiber, owed $2.2 million.
Heller said that over the last nine months, Sleep Innovations sought numerous alternatives to deal with the mounting financial crisis that the company faced, including the sale of some or all of its assets. He indicated that the company simply ran out of time and decided to seek bankruptcy protection.
In addition to its branded products, West Long Branch, N.J.-based Sleep Innovations also produces private label products for Costco, Sam’s, Sears, Target and Kohl’s.