Hollander Sleep Products and parent Dream II Holdings LLC filed Ch. 11 restructuring petitions recently. The largest producer of utility bedding products in North America made the filing in the United States Bankruptcy Court for the Southern District of New York. The company’s Canadian subsidiary is also voluntarily commencing parallel proceedings under the companies’ Creditors Arrangement Act in Canada.
According to HTT’s most recent Supplier Giants ranking, Hollander is the third largest supplier of home textiles to the US market with estimated 2018 wholesale volume of $605 mn. To fund the operations while in Chapter 11, the company secured $118 mn in debtor-in-possession financing (DIP), comprised of $28 mn in incremental “new money” and an additional $30 mn of committed “exit” financing to support a full range of business improvement initiatives once the company exits from bankruptcy.
Both the DIP and the exit financing were provided by a group of the company’s existing term lenders. The balance of the DIP Financing is funded through a $90 mn debtor-in-possession ABL facility provided by the company’s prepetition ABL lenders, led by Wells Fargo Bank. Hollander said these funds and its cash from operations are expected to provide ample liquidity during the Chapter 11 process to maintain normal operations.
The company also filed a Ch. 11 reorganization plan, which the company said is supported by 100 of its existing term lenders. The plan contemplates the conversion of approximately $166.5 mn of current term debt into new equity in the reorganized company and $30 mn of exit financing to provide funding for a full range of business and infrastructure improvements and investment in new manufacturing equipment to improve efficiencies and competitiveness.
While pursuing its deleveraging Ch. 11 plan, Hollander will also be running a marketing process to determine whether there are alternative transactions to ensure that the company maximizes value.
“We are pleased to have reached this agreement with the term lenders, Wells Fargo and our current stakeholders to provide funding and support to restructure our business for long-term success,” said Marc Pfefferle, Hollander’s CEO. “Hollander is making and will continue to make significant progress on improving all facets of our operations, introducing new products, improving customer service levels, lowering our costs and scaling our e-commerce presence. Upon emergence, we will have a stronger balance sheet and the financial flexibility needed to compete in today’s dynamic business environment now and over the long-term.”
Hollander’s offices and plants around the world will remain open, staffed and supplied with the resources necessary to meet the critical needs of our customers, the company said. Hollander expects the Chapter 11 process to last approximately four months.
