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.
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