Interim Management and Turnaround Leads to Debt Restructuring

American Mattress

Addison, Illinois

Challenge

Specialty mattress retailer. $50 million sales. $5 million debt. 100+ locations in two states (IL, IN) and three metro (Chicago, Indy & Ft. Wayne) regions. Approximately 200 employees.


  • Double-digit year-over-year same store sales declines.
  • Liquidity position and bloated cost structure necessitated a dramatic reduction in ad spend.
  • Competition coupled with lack of advertising negatively impacted sales and store traffic.
  • Tried to grow out of trouble (did not address underlying business problem and simply added to cost structure).
  • Majority of stores were not profitable (in general, occupancy costs as a % of net sales were too high).
  • Lack of communication eroded trust and credibility with landlords, advertisers and suppliers.
  • Owners/operators incentives not aligned with creditors.
  • Burning approximately $350k of cash per month (two months of cash remaining).

Solution

  • MorrisAnderson (MA) served as restructuring advisor and subsequently CRO and CFO.
  • Evaluated strategic alternatives including a capital infusion, sale of the business (in Section 363 and out-of-court) and filing for Ch. 11.
  • Negotiated rent concessions and lease buyouts with landlords.
  • Reduced store footprint to approximately 70 locations through buyouts and “going dark.”
  • Addressed the bloated cost structure by significantly reducing management compensation, eliminating approximately 75 team members (through a reduction-in-force and store closures) and reducing remaining team members compensation.
  • Managed communications and negotiations with stakeholders.
  • Provided much needed cash management to prioritize cash disbursements.

Results

  • Extended life of the Company through significant negotiated concessions and dramatic internal cash savings initiatives allowing the Company to dual track either an additional capital infusion or sale of business in an effort by ownership to avoid Ch. 11.
  • Raised additional capital to stave off Ch. 11 and provide management runway to stabilize the top line.
  • Sale of the lender’s secured, unsecured and equity/member interest positions for a 50% premium over the expected recovery in a Ch. 11 or liquidation.

Kyle Putzstuck

Kyle Putzstuck, CPA, is a Director at MorrisAnderson. Kyle brings an extensive background in the accounting and private equity industry and uses that background as basis to structure practical solutions through comprehensive financial analysis. Prior to joining Morris Anderson, Kyle held positions as the assistant controller for Z Capital Partners, a leading global alternative investment… Read More