Serta Simmons plan draws objection from trustee, lenders

By Sarah Lizee

Olympia, Wash., May 11 – Serta Simmons Bedding, LLC’s Chapter 11 plan has drawn objections from the U.S. trustee overseeing the case and an informal group of first-lien lenders, according to documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of Texas.

Region 7 U.S. trustee Kevin M. Epstein filed a limited objection, saying the plan provides overly broad exculpation coverage to the independent directors of the debtors.

Meanwhile, the lender group said the plan isn’t confirmable because it doesn’t comply with the absolute priority rule with respect to any class of claims or interests that have rejected the plan.

“The plan violates the absolute priority rule by making a distribution of over $1.5 million on account of intermediate equity interests, which benefits the debtors’ equity sponsor and minority equity holders,” the group said.

The group also said the plan requires the court to deem the “favored lender indemnity claims” to be an executory contract assumed under section 365 of the bankruptcy code when, in reality, they are unclassified contingent “reimbursement or contribution” claims against the debtors under an integrated credit agreement, and thus can’t be assumed, must be disallowed or subordinated, and can’t receive any recovery under the plan.

The confirmation hearing is scheduled for May 15.

Serta, an Advent International portfolio company, is an Atlanta-based manufacturer and distributor of mattresses. It filed bankruptcy on Jan. 23 under Chapter 11 case number 23-90020.

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