Hollander Sleep Products: Change In Exit Plan

On September 3, 2019 mattress retailer Hollander Sleep Products asked a New York bankruptcy court for permission to switch from a reorganization plan centered on a debt-for-equity swap to a $102 million asset sale.

Details are scarce at this point, but does suggest chances are higher the company will shortly exit from bankruptcy. We don’t have enough data, though, to evaluate whether the price offered will increase or decrease the roughly 50% of debt and equity value written down through June 2019 by PennantPark Investment (PNNT) and PennantPark Floating Rate (PFLT), or ($16mn).

As we wrote on August 16, Hollander has been on non accrual in both the first and second quarter of 2019 and in bankruptcy since May. It’s likely that both the BDCs involved will be booking a significant realized loss in the third or fourth quarter, depending when the judge responds to the latest request and the proposed acquisition becomes effective.