Serta Simmons has failed the efforts of Apollo Global Management, run by billionaire Leon Black, which could move the debt markets in a pre-setting move to stop the controversial debt restructuring.
New York State Supreme Court Judge Andrea Mosley ruled over the weekend that the mattress vendor could go ahead with a plan to restructure a $ 1.95 billion senior debt, creating bankruptcy by creating new loans, ahead of current senior creditors, including Apollo. Accounted for one-third of the debt.
Apollo and hedge fund Angelo Gordon have sued Serta Simmons and its private equity owner, Advent International, claiming their debt status has been downgraded. They requested the judge to issue a moratorium to prevent the contract from closing. Mosley ruled against a moratorium.
At trial she still ruled in favor of Apollo, but indicated she might not. “At this point, as a breach of contract, there is no chance of court success,” she said in her ruling.
Experts said Serta Simmons’ efforts to circumvent her senior creditors could turn the risks of investing in corporate debt.
“Generally, the deal is that if you’re a senior you’re at the top of the pile,” Seton Hall professor and renovation expert Stephen Lubben told The Post. “I think if they can get it [restructuring] By a majority vote, many borrowers are thinking about how they can restructure their debt. “
Lubben cites a previous case, during which minority senior lenders disagreed with the refinancing plan, but it was forced. In 2009, the bankrupt Chrysler sold itself to a deal in which junior lenders United Auto Workers acquired a 55 percent stake in the new company.
The objecting party, Indiana State Police Pension, owns 2 percent of Chrysler’s senior loans, while in the case of Serta Simmons, the Apollo-led group owns 33 percent of the company.