Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, January 25. In today's newsletter, we recap the first-day bankruptcy hearing of Serta Simmons Bedding, which wants to end litigation against its majority lenders over a 2020 rescue deal that disadvanted Apollo, Angelo Gordon and others that didn't participate.

Serta files chapter 11 as lender feud drags on. Serta Simmons Bedding LLC filed for chapter 11, aiming to cut nearly $1.6 billion in debt from its balance sheet and end a yearslong feud with Angelo Gordon & Co., Apollo Global Management Inc. and other minority lenders.

Most of Serta’s top creditors and its private-equity owner Advent International Corp. have signed on to its restructuring plan. But Serta enters chapter 11 at odds with certain minority lenders over a rescue deal in 2020, when the company pulled off a controversial debt exchange and capital raise to stay afloat through the worst of the Covid-19 pandemic.

Angelo Gordon, Apollo and Gamut Capital Management LP didn’t participate in that rescue deal, and have been fighting to unwind it ever since, saying it improperly subordinated their claims as minority lenders and wasn’t allowed under the company’s debt agreements.

That legal fight now shifts to bankruptcy court, where Serta is seeking to validate the 2020 deal as part of the chapter 11 restructuring. Serta and its majority lenders want disputes around the 2020 deal decided in the bankruptcy case to provide finality for the company and its new owners.

Invesco Ltd., Eaton Vance Management and other top lenders would trade more than $1 billion in debt claims under the company’s bankruptcy plan for $300 million in new debt, plus nearly full ownership of the restructured business.

Minority lenders that are owed roughly $860 million meanwhile would be nearly wiped out under Serta’s plan. They are now seeking permission from the bankruptcy court to continue pressing damages claims against Invesco, Eaton Vance and the other majority lenders outside of chapter 11.

Microchip maker Rockley Photonics files for bankruptcy. Rockley Photonics Holdings Ltd., which makes microchips that can be used in wearable health monitoring devices, filed for bankruptcy with a creditor-backed plan that will hand control of the business to bondholders.

Publicly traded Rockley said in court papers filed Monday in the U.S. Bankruptcy Court in New York that it has won support for a chapter 11 plan of reorganization under which bondholders owed roughly $119 million will forgive that debt in exchange for equity in the reorganized business.

Bondholders also agreed to provide Rockley with $35 million in new financing in the form of a chapter 11 exit loan and private placement agreement offering bondholders the right to purchase an additional $20 million of the reorganized company’s stock.

U.S. economy slows, but Europe raises hopes world will avoid recession. The divergence suggests that while the U.S. economy continues to lose momentum, Europe’s could be stabilizing, at least for now. Recent surveys point to a global economy that looks likely to slow this year but could avoid recession.

• Consumers tired of inflation scrimp—and splurge. After more than a year of high inflation, consumers are exhausted from the dozens of budgeting micro-decisions they must make in a given day. And yet, some with at least a little wiggle room in their budgets are deciding to splurge on trips, experiences and designer products while drastically cutting back elsewhere.

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Soma Biswas; Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Jonathan Randles; Alexander Saeedy; Andrew Scurria; Becky Yerak. 

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