Tuft & Needle X Serta Simmons Bedding, Chapter 11
Today, Serta Simmons Bedding filed for Chapter 11 and Tuft & Needle was a part of that. Not a complete surprise since the possibility was leaked a few months ago. But it is sad to see the bankruptcy actually happen.
Key details from the press release:
SSB has entered into a Restructuring Support Agreement with key financial stakeholders that will significantly reduce the company’s debt and enable the company to continue making critical investments in its business and brands. To implement the restructuring contemplated by the agreement, most of SSB’s U.S. corporate entities have initiated a voluntary pre-arranged court-supervised process under Chapter 11 of the U.S. Bankruptcy Code.
The restructuring will substantially reduce the company’s funded debt from approximately $1.9 billion to approximately $300 million and enable the company to continue making critical investments in its business and brands. The company has received a commitment for a $125 million exit ABL Credit Facility available upon SSB’s emergence from Chapter 11. The company has also obtained a debtor-in-possession financing in the form of a $125 million ABL Credit Facility. Upon Court approval, the new financing, along with approximately $170 million of cash on hand as of the filing date, and cash generated from the company’s ongoing operations, will be used to support the business during the court-supervised process.
SSB has filed a number of customary “first day” motions seeking Court approval to support its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption, as well as the continued support of its customer programs and consumer product warranties. The company is also seeking Court permission to pay suppliers, either during the Chapter 11 process or upon emergence from it, for goods and services that were provided prior to the bankruptcy filing date. The company expects business to continue as usual throughout the process and trade vendors and suppliers will be paid in full under normal terms for goods and services provided on or after the filing date.
Clearly this is a disappointing day for current and former employees who believed in our mission. I wish the outcome would have been different. We all had high hopes for the combined company's potential.
From a customer's perspective, bankruptcy doesn't mean that the Tuft & Needle brand is going away. This could even be a positive turning point for the products and the experience as of late. The Chapter 11 process lets you default on some debt, renegotiate contracts, and you often come out of bankruptcy stronger than before.
I’d like to believe so as well, that bankruptcy shouldn’t make a difference for customers, and if anything, it will be good. Things must burn to emerge.
But these restructurings usually entail a change of control in the company. When we agreed to merge Tuft & Needle with Serta Simmons, we had faith in the pedigree of Advent International and the current board, which includes business legends like former UTC CEO George David and GAP CEO Glenn Murphy, to be great stewards of the business.
In hindsight, the danger of leverage may seem obvious, but the events that unfolded were far from expected. More on that here:
Now, the brand that we built will be traded for debt and passed off to new owners. Not sure who those will be yet, but the ownership will likely derive from the creditor group (Apollo, Eaton Vance, etc.) in some shape or form.
It has been some time since I’ve been operationally involved with Serta Simmons and the business. But, regardless of the outcome here, I care about the future of the Tuft & Needle brand.
I wish the best of luck to the teams as they work through the bankruptcy and come out on the other side.
Serta is working with advisers Weil, Gotshal & Manges, Evercore Group and FTI Consulting, according to the statement. Gibson Dunn & Crutcher and Centerview Partners are advising creditors, while Ropes and Gray are working with Advent.
The case is Serta Simmons Bedding LLC, 23-90020, US Bankruptcy Court for the Southern District of Texas.