Simmons Plans to File for Bankruptcy Protection By THE ASSOCIATED PRESS Published: September 25, 2009 http://www.google.com/hostednews/ap/article/ALeqM5i7cjemVctseR3O2J-OiQvBzE-aYgD9AUGKI00 Filed at 2:23 p.m. ET ATLANTA (AP) -- Simmons Co., the maker of Beautyrest mattresses, said Friday that it plans to file for Chapter 11 bankruptcy protection, a move that will put new owners in charge of the bedding unit and significantly lower the company's debt. Sales have slumped for mattress makers as consumers pull back on their spending during the recession, especially on big-ticket items like mattresses. The plan, which will not affect the company's operations, is expected to reduce its total debt from about $1 billion to $450 million. It must receive bankruptcy court approval. Privately held Simmons said the restructuring would include the acquisition of Simmons Bedding Co., its subsidiaries and parent company Bedding Holdco Inc. by affiliates of private equity fund Ares Management LLC and Teachers' Private Capital, the private investment branch of the Ontario Teachers' Pension Plan. The company has been held by private equity firm Thomas H. Lee Partners -- or THL -- since 2003, when it bought Simmons Co. for $1.1 billion from Fenway Partners, a New York private investment firm. Fenway had bought Simmons in 1998 from investment firm Investcorp. for $513 million. The current deal, worth about $760 million, includes equity from Ares and TPC and some of Simmons' current lenders plus debt commitments from some Simmons' lenders. Most Simmons and Simmons Bedding note holders, including holders of Simmons 10 percent discount notes and Simmons Bedding $200 million senior subordinated notes, support the plan. Simmons Bedding note holders will be entitled to a prorated share of $190 million in cash, while Simmons note holders will get a share of $15 million in cash. Simmons Bedding vendors, suppliers, workers and senior bank lenders will be paid in full under the plan, the company said. Note holders and senior bank lenders will be solicited to vote on the restructuring, with the process likely to close within 30 days of the solicitation's launch. Simmons plans to file for bankruptcy court protection after that. The filing will not include Simmons Bedding subsidiaries in Canada and Puerto Rico, but those units will be included in the acquisition. Simmons Bedding also has arranged $35 million in debtor-in-possession financing. The move gives the company a chance to get out from its debt and restructure to recover from falling sales and shrinking profit. Simmons' sales fell nearly 19 percent in the three-month period ending in June to $218 million, according to filings with the Securities and Exchange Commission. It posted a net loss of $5.8 million, compared to profit of $1.1 million in the same period last year. For the first half of the year, sales are down 19 percent and Simmons has lost nearly $9 million. The entire industry is hurting. Leading seller Sealy Corp. said in June that its second-quarter sales fell 20.5 percent in the three-month period that ended in May. It posted a net loss of $5.2 million, compared with a profit of nearly $12 million a year earlier. Rival Tempur-Pedic International Inc., said in July its profit dropped 17 percent as sales fell 22 percent in its second quarter. But as the economy starts to show signs of improvement, mattress sales also appear to be ticking upward. Last week SunTrust Robinson Humphrey analyst Keith Hughes told clients in a note there were signs of ''incremental improvement'' in mattress sales over Labor Day weekend, though they were still slower than last year. The company started in 1870 when Zalmon G. Simmons built his first factory in Kenosha, Wis.