Creditors filed an involuntary Chapter 7 bankruptcy petition against Dial-A-Mattress last week, seeking approximately $1.7 million. Typically, this would result in the liquidation of the company.
After receiving offers from several interested parties last week, Dial-A-Mattress decided to file to convert the Chapter 7 bankruptcy to a Chapter 11 filing, which would allow it to reorganize and complete the sale to Sleepy’s. Sleepy’s has offered to provide debtor in possession financing that, together with the company’s existing cash flow, will enable 1800mattress.com to fulfill the obligations associated with continuing to operate its business. This financing is subject to court approval.
“We have determined that Sleepy’s offered us the best opportunity to recapitalize and move our business plan forward,” said 1800mattress.com chairman and CEO Napoleon Barragan, in a statement. “There are tremendous business synergies we can leverage by affiliating with Sleepy’s. This combination offers us the opportunity to realign our capital structure and to pursue our historic strengths in phone and Internet sales.”
1800mattress.com was founded in 1976 and, at its height, produced $170 million in sales annually. While today consumers can shop by telephone, Internet, Live Chat, facsimile or by visiting a showroom, in the beginning the company pioneered the idea of buying mattresses via the telephone. When the company started promoting the toll-free number in broadcast advertising in 1988, sales increased dramatically, leading to the creation of a well-regarded customer service division and the installation of the first computer system to track inventory, sales and deliveries. The company’s first e-commerce Web site launched in 1999.
Sleepy’s is a privately-owned company with nearly 700 locations in 11 states, spanning from Vermont to Virginia.