Simmons to restructure under new owners

Bankruptcy's repeat offenders

Many big companies have managed to emerge from Chapter 11, but it's a lot harder to bounce back from a second bust...or a third.

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NEW YORK (CNNMoney.com) -- Simmons Co., the nation's second-largest mattress maker, said Friday that it agreed to be acquired by a private equity group for $760 million as part of a Chapter 11 restructuring plan.

Atlanta-based Simmons said the deal will allow it to slash its debt to $450 million from about $1 billion.

The agreement includes a Chapter 11 filing upon approval from lenders and noteholders. Nearly three-quarters of Simmons' noteholders have agreed to support the plan, according to a company statement.

The filing shows "the depths of this downturn for the mattress industry," said analyst Keith Hughes of SunTrust Robinson Humphrey in a research note, adding that this is the worst downturn the normally stable industry has seen its history.

Mattress sales are still below last year's level, but they showed a slight pick up over the Labor Day holiday earlier this month, he said. With mattress units stabilizing, Hughes said "maybe the worst has passed."

Under the deal, private-equity firm Ares Management and Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan, along with some of Simmons' current lenders will contribute equity. Teachers' also owns National Bedding Co. -- the largest manufacturer of bedding under the Serta brand.

Simmons, which has been owned by Boston private equity firm Thomas H. Lee Partners since 2003, has been struggling under mounting restructuring charges. At the end of the second quarter, the company had $67.3 million of cash on hand but less than $100,000 available to borrow under a senior credit facility.

Under the restructuring plan, Simmons said senior subordinate noteholders will receive $190 million in cash and discount noteholders will receive $15 million in cash. All vendors, suppliers, employees and senior bank lenders will be paid in full.

"We believe that the resiliency Simmons Bedding has shown during these turbulent times is a sign of its strength and that should be apparent to all of its key stakeholders," said Bennett Rosenthal, a senior partner at Ares, in a statement.