
New Orleans – A federal appeals court in New Orleans ruled earlier this week that Serta Simmons Bedding lenders were not given equal treatment in a 2020 loan deal secured ahead of the mattress makers’ 2023 Chapter 11 bankruptcy filing.
The decision from the three-judge panel of the 5th U.S. Circuit Court of Appeals could have ramifications that stretch beyond the mattress company’s business into how corporate financing deals are structured.
The ruling did not overturn SSB’s restructuring plan approved in 2023, but it took out the indemnity provisions that offered protection to lenders from legal action over the disputed debt deal that gave SSB $200 million in cash. That deal pushed lenders, including Apollo Global Management and Angelo Gordon & Co., back in the repayment line.
The court said, other than removing the indemnification clause, Serta Simmons’ restructuring plan should remain in place.
Serta Simmons executives had no comment on the ruling.
In June, at the same time a bankruptcy judge approved the company’s reorganization plan, the court ruled in favor of a group of preferred lenders. The bankruptcy resulted in Serta Simmons’ equity being held by a select group of lenders; other lenders farther down the list got less than the face value of the debt owed them by the company.
The appeals court found that the 2020 debt deal was “controversial,” but similar financing deals, known as uptier transactions in lending circles, have become more commonplace for distressed companies looking to leverage more debt.
Court documents show that Serta Simmons had $2.4 billion in loans before the 2020 debt was secured. The court said SSB opted to choose its lenders through private means instead of on the “open market.”