Houston Bankruptcy Watch: Mattress Firm

: Reese Baker & Associates

  Filed under: News

Houston Bankruptcy watchers saw the Houston-based mattress manufacturer and retailer, Mattress Firm, announced that it was filing for Chapter 11 bankruptcy. Attorneys in Houston Texas will explain that in most retail Chapter 11 bankruptcy cases, overexpansion will result in a “financial timeout” to downsize the least profitable stores and reorganize their debt obligations. This usually includes renegotiating the time that a loan is due and/or the overall interest or principal.

Mattress Firm Bankruptcy

As with so the 20 or brick-and-mortar chain stores that have filed bankruptcy in the last 24 months, causes of the Mattress Firm Chapter 11 bankruptcy are attributed to stiff competition from online retailers. Retail conglomerate Steinhoff acquired Mattress Firm just 2 years ago for a massive $3.8 billion. The Houston bankruptcy was also attributed to accounting issues with their parent company, in addition to, excessive physical stores.

The Houston mattress company has acquired three competitors in just the last 6 years, Sleepy’s, Sleep Train, and Mattress Giant, which added an enormous amount of stores that were in close proximity of each other, which essentially cannibalized sales.  As part of its bankruptcy reorganization process, Mattress Firm will close 700 of its 3,230 stores in the US, with at least 200 closing almost immediately.

Texas Bankruptcy: Chapter 11

Typically, when large companies like Steinhoff fall into financial distress and need bankruptcy relief, Chapter 11 bankruptcy comes to the rescue. Chapter 11 bankruptcy allows LLCs and Corporations to continue operating while placing an automatic stay on creditors. This affords the business entity to restored secured debts and discharges a portion or all unsecured debts.

Quickly after filing Chapter 11, the retailer Mattress Firm reported raising a $650 million loan to fund its ongoing operations, and with so many stores to transfer merchandise to, it’s unlikely you’ll see the “fire sales” that came from other Chapter 11 store closures, such as Radio Shack or Toys-R-Us. Instead, the end result will be fewer Mattress Firm stores.

Bankruptcy attorneys in Houston, TX

Bankruptcy attorneys in Houston, TX believe that the company should be able to reorganize their debt and exit bankruptcy protection relatively quickly. Additionally, the bankruptcy will allow the embittered company to improve cash flow and profitability and to reorganize its real estate portfolio. Bankruptcy experts close to the case feel that vendors for the company, including Simmons and Serta, will be repaid back in full. No doubt, excellent news in the Chapter 11 bankruptcy case.