A healthier Ortho seen mattress, has structured a reorganization plan
Ortho Mattress Inc has structured a reorganization plan that will give creditors 46.8% ownership of the company. Creditors will be given shares of Ortho's preferred stock to be repurchased by the mattress manufacturer at a later date in accordance with a negotiated plan based on the company's cash flow. Ortho had 90 stores in four western states and had estimated annual sales of $50 million before it was forced into bankruptcy in 1990.
Ortho Mattress Inc., a factory-direct retailer based in Rancho Dominguez, Cal., plans to emerge from Chapter 11 bankruptcy protection "as a healthy, viable and hopefully profitable company," said David Levene, an attorney from the Los Angeles-based firm Levene Eisenberg representing the 44-unit Ortho.
Under the reorganization plan approved by U.S. Bankruptcy Judge William Lasarow, the mattress company will convert its creditors' claims from debt into equity, including notes, two classes of preferred stock and common stock. CONVEYING THE MESSAGE WITH FEELING
Creditors will receive shares of the company's preferred stock, which will be repurchased by the company according to a schedule based on cash flow. The agreement also gives creditors ownership of 46.8 percent of the company's common stock.
Howard Roeder, president and operating chief of Ortho, added, "We will continue to build upon our position as California's largest factory direct retailer of bedding."
Levene noted, "The plan will eventually return to the creditors all that is owed to them. The various creditors will receive securities which will be redeemable over time.
The company's creditors, which include Leggett & Platt, Maxwell Products, Quality Quilters and Reliance Upholstery Supply, may begin redeeming their shares of Preferred Stock in just over one year.
"We have gotten indications that our major trade suppliers are ready to open us up on some credit, which speaks most loudly on the strength of the company," he added.
High debt service resulting from a leveraged buyout, followed closely by the recession, led the company to file for bankruptcy protection on Dec. 4, 1991, said Roeder. The firm has spent the last year restructuring its western operations, which resulted in closings of marginally profitable stores. twin size futon mattress futonadvisors
In 1990, its peak year, the company had more than 90 stores in Arizona, California, Nevada and Utah, and estimated sales of $50 million. The remaining 44 stores, all within California, are expected to generate sales of $27 million this year.
The company formerly transported mattresses to out of state stores from its Rancho Dominguez factory but closed those locations and reduced its warehousing and distribution expenditures. The company currently has about 200 employees.
"Ortho has been a part of the California marketplace since 1963, and we intend to remain here," noted Roeder. He added that he hopes to open a few new stores in 1993.
When Ortho filed for bankruptcy protection, it was the second company owned by Pacific Assets Management to do so. The first was RB Furniture, which filed one month earlier and subsequently dosed all its stores.