Innovative Mattress Solutions Files Chapter 11; Tempur Sealy Commits up to $14MM in DIP Financing

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January 14, 2019, 07:38 AM

Filed Under:

Related: Bankruptcy, Chapter 11, Debtor in Possession

Kentucky-based Innovative Mattress Solutions (IMS), parent company of Sleep Outfitters, Mattress Warehouse, and Mattress King, commenced voluntarily restructuring under Chapter 11, citing "a transformative stage" in the company's 35-year history.

"The industry, competitive pressures and customer expectations have changed, and we are changing to position ourselves for the future," the company said in a statement.

Tempur Sealy International, Inc. has agreed, subject to bankruptcy court approval, to provide debtor-in-possession financing to Innovative Mattress Solutions, LLC (iMS) in connection with iMS' Chapter 11 bankruptcy filing. The Company has agreed to provide up to $14 million in DIP financing to facilitate iMS' bankruptcy process, which iMS has indicated will include optimizing its portfolio of retail locations, and is anticipated to be completed during the first half of 2019.

iMS operates 142 specialty sleep retail locations primarily in the southeastern U.S. under the names Sleep Outfitters, Mattress Warehouse, and Mattress King. For the year ended December 31, 2018, iMS represented less than 2% of the Company's global net sales. As a result of the iMS bankruptcy, the Company will record a charge of approximately $21 million during the fourth quarter of 2018 to fully reserve this account, which will be excluded from adjusted EBITDA as a pro forma adjustment under the Company's senior secured credit agreement.

Tempur Sealy International, Inc. Chairman and CEO Scott Thompson commented, "Innovative Mattress Solutions has served over a million consumers and built equity for their and our brands in their markets. However, we believe iMS' overextended retail footprint and thin capital structure were not designed to effectively respond to the competitive pressures of the recent retail environment. This caused the unexpected need for bankruptcy protection. We will review strategic alternatives related to iMS during its bankruptcy process with a focus on what is best for Tempur Sealy consumers in the affected markets."