A report from Bloomberg Law News says that Serta Simmons Bedding may be preparing to file for Chapter 11 bankruptcy protection as soon as January, as the manufacturer has been in confidential talks with its creditors over a restructuring plan.
This may involve giving control to certain first-lien lenders, the report says, but talks are still in the works and plans have the potential to change.
Serta cut an out-of-court restructuring deal with creditors that added “super-priority” debt when it felt the debt heat in 2020.
It also pushed down some lenders back in line for repayment — a group of funds including Angelo Gordon & Co. and Apollo Global Management recently sued Serta and rival lenders, seeking to invalidate the transaction.
Key takeaways from the report:
Serta’s entire debt load of more than $2 billion matures next year, and its nearly $843 million first lien term loan due November 2023 is quoted at around 9 cents on the dollar.
Given the large debt wall and fading performance due to an inflationary environment, Serta will likely see a default, bankruptcy filing or debt restructuring in the coming months, according to S&P Global Ratings.
Lower consumer confidence and a slowdown in the housing market will likely hurt demand for bedding-related products, a credit grader said.
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