Simmons Company (Simmons) and its indirect subsidiary Simmons Bedding Company (Simmons Bedding), a leading manufacturer of premium-branded bedding products, on September 25 announced that their boards of directors have approved a restructuring plan under which they have entered into an agreement that provides for the acquisition of Simmons Bedding and all of its subsidiaries, as well as its parent Bedding Holdco Incorporated, by certain affiliates of Ares Management LLC and Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan.
As part of the restructuring of its debt obligations and the related transaction, Simmons will reduce its total indebtedness from approximately $1 billion to approximately $450 million. Simmons will emerge from this process with a stronger balance sheet and increased financial flexibility.
The transaction is comprised of total consideration of approximately $760 million, including equity from the purchaser and certain of Simmons' and Simmons Bedding's current lenders as well as debt commitments from certain of Simmons' and Simmons Bedding's current lenders. Further, a significant majority of noteholders of Simmons and Simmons Bedding have agreed to support the plan, including holders of 75.4 percent of Simmons Bedding's $200 million 7.875 percent senior subordinated notes ("senior subordinated notes") and 72.6 percent of Simmons' 10 percent discount notes ("discount notes").
Stephen G. Fendrich, Simmons Bedding's president and chief operating officer, commented, "The purchase agreement we have executed and the support we have secured from our noteholders for this restructuring plan underscore the strength of the Simmons brand, our strong performance in the marketplace, and the value of the strategic and operational investments we have made in our business, people and processes over the past several years. Simmons Bedding is firmly positioned as an industry leader and under this plan will retain its own identity and operational structure, have a newly strengthened balance sheet, and will remain committed to bringing innovative bedding products to our customers. I am extremely pleased that the plan protects our employees and provides for our senior lenders and suppliers to be paid in full.
"I want to thank our employees and advisors who have worked very hard in the face of an unprecedented industry downturn to bring us to this significant and welcome milestone, and I extend thanks as well to all of the stakeholders who continue to play a part in ensuring that our business operates as usual as we complete this process. Our new investors understand our industry and recognize that Simmons Bedding is a great North American manufacturer; we look forward to working with them to build upon its 139 year history of innovation, quality and service in the bedding industry."
The Restructuring Plan
Under the plan, all of Simmons Bedding's trade vendors, suppliers, employees and senior bank lenders will be paid in full, while each holder of Simmons' senior subordinated notes will be entitled to receive its pro rata share of $190 million in cash and each holder of Simmons' discount notes will be entitled to receive its pro rata share of $15 million in cash (which amount may be invested in the equity of a new indirect holding company for Simmons Bedding by holders of the discount notes who satisfy investment requirements designed to assure compliance with securities laws and specified in the plan). Each of the senior subordinated notes and discount notes distribution is subject to adjustment in certain circumstances.
Simmons and its domestic subsidiaries expect to launch a formal process to solicit votes for its pre-packaged plan from the senior bank lenders and the holders of the senior subordinated notes and discount notes as soon as solicitation materials are ready. The solicitation process is expected to be completed within 30 days after launching.
Following the solicitation period, and in order to implement the restructuring, Simmons and its domestic subsidiaries intend to commence Chapter 11 cases under the U.S. Bankruptcy Code and seek confirmation of the pre-packaged plan. While the anticipated bankruptcy filings will not include Simmons Bedding's subsidiaries in Canada and Puerto Rico, these operations will be acquired under the terms of the purchase agreement.
In connection with the plan, Simmons Bedding also has arranged for a $35 million debtor in possession revolving credit facility with certain lenders, pursuant to which Deutsche Bank Trust Company Americas will act as the administrative agent and collateral agent and Deutsche Bank Securities Inc. will act as the sole book runner and lead arranger.
Throughout the restructuring process, Simmons Bedding expects to continue normal operations under its current ownership structure and does not anticipate any changes to its overall business or its ability to meet its customers' needs.