The Work

January 8, 2010 5:53 PM

The Bankruptcy Files: Once Upon A Mattress

Posted by Brian Baxter

If the first week of 2010 is any indication, bankruptcy might not slow down as much as expected this year.

Last month Reuters reported that there would be fewer bankruptcies in 2010, but still plenty of room for deals. Many of those bankruptcies, Reuters reports, will be quicker, cleaner, and smaller. (The Wall Street Journal also reported on bankruptcies this week, looking at "quickie" Chapter 11 proceedings.)

The WSJ noted that the quick bankruptcy sales of Chrysler and General Motors last year would serve as a roadmap to other troubled companies this year. The number of personal bankruptcy filings also is on the rise, the paper reported.

Here's the latest on new, and not-so-new, filings:

Simmons Bedding

The seemingly never-ending bankruptcy odyssey of Atlanta-based Simmons Bedding took its latest turn earlier this week when a bankruptcy judge in Delaware approved its prepackaged restructuring plan.

Last September Simmons' former private equity owner Thomas H. Lee Partners (THL), which bought the company for $1.1 billion in 2003, announced a bankruptcy reorganization plan that would result in the sale of the mattress maker to a private equity consortium that owns rival Serta International. The deal is valued at $760 million.

Sullivan & Cromwell M&A partner Alison Ressler, restructuring partner Andrew Dietderich, financing partners Hydee Feldstein and Jay Clayton, antitrust partner Yvonne Quinn, tax partner Andrew Mason, and employee benefits partner Matthew Friestedt are advising Los Angeles-based private equity firm Ares Management and the Ontario Teachers' Pension Plan on the Simmons acquisition. (S&C advised both clients when they acquired Serta in 2005.)

Weil, Gotshal & Manges business finance and restructuring partners Michael Walsh and Lydia Protopapas are advising Simmons. Bankruptcy court records show that the firm has received nearly $10.4 million in pre-petition fees and expenses from Simmons since October 2008. The firm has not filed any additional billing requests since Simmons entered bankruptcy in November.

The New York Times reported last fall on how THL and several other buyout firms profited off of Simmons even as the debt-laden mattress maker was to be sold in bankruptcy--the seventh time the company had been put up for sale in two decades.

The company's latest restructuring plan will allow it to reduce its debt load from $1 billion to about $450 million.

FirstFed Financial

A month after federal regulators shut down the banking unit of Santa Monica-based FirstFed Financial, the savings and loan holding company filed for bankruptcy in San Fernando Valley, Calif.

Like many victims of the economic downturn, FirstFed owes its collapse to a loan portfolio tied to billions in adjustable-rate mortgages. The company was one of the oldest financial institutions in Los Angeles, but after its First Federal banking unit failed in December, FirstFed was forced to sell its 39 branches and their $4.5 billion in deposits to OneWest, formerly IndyMac. (The deal was seen as a victory for loosening restrictions on private equity investment in failed banks.)

Jon Dahlberg, a former Andrews Kurth partner now with Landau Gottfried & Berger in Los Angeles, is advising FirstFed in its Chapter 11 case. FirstFed listed assets of only $4.47 million and liabilities of nearly $160 million in its bankruptcy filing.

Bankruptcy court records also show that FirstFed owes Manatt, Phelps & Phillips, Morrison & Foerster, and Nixon Peabody an undetermined amount in legal fees.

International Aluminum

If Weil Gotshal is looking for material to fashion its bankruptcy crown, it need look no further than its latest Chapter 11 client, Monterey Park, Calif.-based International Aluminum.

Private equity firm Genstar Capital, a Weil client, acquired the aluminum and vinyl building products maker for $228 million in January 2007. But the subsequent downturn in commercial and residential construction crippled International Aluminum, forcing it to file for bankruptcy protection in Delaware on January 4.

Weil restructuring partner Gary Holtzer and litigation partner Salvatore Romanello are acting as lead debtors' counsel. John Knight of Delaware's Richards, Layton & Finger is serving as local counsel to the company. Bankruptcy court records also show that International aluminum owes Toronto firm Blake, Cassels & Graydon roughly $28,100.

White & Case restructuring partner John Cunningham and litigation partner Jason Zakia are advising a group of mezzanine lenders holding almost 75 percent of International Aluminum's debt. A proposed reorganization plan provides for full payment of claims filed by vendors and suppliers.

Mesa Air

With a fleet of more than 130 aircraft, Phoenix-based Mesa Air helps larger carriers move their passengers to smaller places. But when Delta sought to cancel its contract with Mesa early last year, the tiny airline turned to Jones Day to fight back, eventually winning an appellate court ruling blocking the move.

It was a bet-the-company case for Mesa, which claimed that cancellation of the contract would force the regional carrier into bankruptcy. But Delta didn't back down and seven months later Mesa finds itself seeking Chapter 11 protection in Manhattan, after the airline was unable to reach a deal with aircraft manufacturers and overcome mounting costs.

Mesa is now relying on a team of attorneys from bankruptcy boutique Pachulski Stang Ziehl & Jones to help it implement a restructuring plan. Name partners Laura Davis Jones (a onetime American Lawyer Dealmaker of the year in 2002) and Richard Pachulski, partners Robert Feinstein and Debra Grassgreen, and of counsel Maria Bove are advising the airline.

Mesa has already sidelined 50 planes in its fleet and announced plans to sell another 25 in the following months.

Thomson S.A.

French electronics and entertainment provider Thomson filed a Chapter 15 petition in bankruptcy court in Manhattan shortly before the holiday break. The company, which manufacturers everything from set-top cable boxes to surround sound theater systems, is seeking to restructure a heavy debt load.

The media services company has turned to Davis Polk & Wardwell to handle its Chapter 15 filing in the U.S., as well as advise on its request for a "sauvegarde," the equivalent of a Chapter 11 case in France.

Davis Polk litigation partner Karen Wagner in New York, corporate partner Jeffrey O'Brien in London, and corporate partner Arnaud Pérès in Paris led a team from the firm advising Thomson on its restructuring efforts. Thomson is based in the Parisian suburb of Issly-les-Moulineaux, home to many leading companies in France's media and telecom industry.

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