Hollander files Chapter 11 reorganization plan with lender support

By Sarah Lizee

Olympia, Wash., May 20 – Hollander Sleep Products, LLC, its parent Dream II Holdings, LLC and some of their subsidiaries filed voluntary petitions to restructure under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.

The company’s Canadian subsidiary is also voluntarily starting parallel proceedings under the Companies’ Creditors Arrangement Act in Canada, according to a press release.

The company filed a Chapter 11 reorganization plan, which is supported by 100% of the company’s existing term lenders.

The plan contemplates the conversion of about $166.5 million of current term debt into new equity in the reorganized company and $30 million 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, the company said.

Hollander will also run a comprehensive marketing process to determine whether any third-party sale, or combination of sales, will provide a more optimal restructuring for the debtors’ estates than the proposed term lender transaction.

Bids for the company’s assets will be due by 4 p.m. ET on July 26. The company is seeking an auction to be held on Aug. 1.

Under the plan, holders of other secured claims will receive payment in full in cash for their claims, collateral securing their claims or reinstatement of their claims.

Holders of secured tax claims will receive cash in full for the unpaid portion of their claims or equal semiannual cash payments continuing for five years from the petition date equal to their claim.

Holders of term loan claims will receive their pro rata share of the term loan if an entity other than the term loan lenders is the winning bidder. Otherwise, they will receive a pro rata share of 23% of new interests.

Holders of general unsecured claims will receive their pro rata share of excess distributable cash in full for their claims if the term loan lenders are not the winning bidder. Otherwise, they will receive their pro rata share of a recovery amount to be agreed upon by the lenders.

Holders of intercompany claims and interests will have their claims reinstated or cancelled.

Holders of Dream II interests will be cancelled.

Holders of other priority claims will receive payment in full of the unpaid portion of their claim.

Hollander’s offices and plants will remain open, staffed and supplied with the resources necessary to meet the critical needs of customers, the company said.

The company said it expects the Chapter 11 process to last about four months.

The company is requesting a hearing for the disclosure statement on July 17 and a hearing for the plan confirmation on Aug. 26.

DIP Financing

To fund the company’s operations while in Chapter 11, the company secured $118 million in debtor-in-possession financing, comprised of $28 million in incremental new money and an additional $30 million of committed exit financing to support a full range of business improvement initiatives once the company exits from bankruptcy.

Both the new money DIP financing 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 million DIP asset-based facility provided by the company’s prepetition ABL lenders, led by Wells Fargo Bank.

These funds and Hollander’s cash from operations are expected to provide ample liquidity during the Chapter 11 process to maintain normal operations, the company said.

Debt details

According to court documents, Hollander has $100 million to $500 million in total assets and $100 million to $500 million in total debt.

The company’s largest unsecured creditors are Roind Hometex Co. Ltd. of Las Vegas, with a $5.66 million claim, Funing Jincheng Home Textile Co. Ltd. of Jiangsu, China, with a $5.27 million claim, Invista Inc. of Atlanta, with a $5.02 million claim, Hangzhou Chuangyuan Feather Co. Ltd. of Hangzhou, China, with a $5 million claim, and Zhejiang Hengdi Bedding Co. Ltd. of Hangzhou, China, with a $3.88 million claim.

Kirkland & Ellis LLP is providing legal counsel to Hollander. Carl Marks Advisory Group, LLC is acting as CEO and financial adviser and Houlihan Lokey Capital, Inc. is acting as investment banker to the company. Omni Management Group, LLC is acting as claims agent.

The Boca Raton, Fla.-based company designs, manufactures and markets utility bedding products. The Chapter 11 case number is 19-11608.

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