1-800-Mattress files for bankruptcy, to be acquired by Sleepy’s

1-800-Mattress filed for bankruptcy protection and plans to sell the business to its rival, Sleepy’s, according to court documents filed Tuesday.

Dial-A-Mattress Operating Corp., owned by founder Napoleon Barragan, said it has experienced a steep drop in sales across its 1-800Mattress.com brand and been subject to more stringent terms from vendors, two factors that were squeezing the company. By entering into a transaction with Bethpage, N.Y.-based Sleepy’s, 1-800-Mattress is allowing it to acquire certain assets of the company.

However, the sale is still not complete. Creditors Sealy, Serta Mattress Co., Simmons Manufacturing Co., and Tempur-Pedic, filed for a Chapter 7 involuntary bankruptcy petition against Dial-A-Mattress Operating Corp. last Tuesday, according to a report on CNBC.com.

In a Chapter 7 filing, a trustee is typically appointed and the company is liquidated. According to court documents filed Tuesday, the company is now seeking to convert that to a Chapter 11 reorganization, which will include a bidding process and ultimately a court ordered sale of the company. 1-800-Mattress expects to complete the sale under Chapter 11 protection.

"We've determined that Sleepy's offers us the best opportunity to recapitalize and move our business plan forward," said Barragan. "This combination allows us to realign our capital structure and to pursue our historic strength in phone and Internet sales."

Dial-A-Mattress's sales had tumbled to less than $100 million, from $170 million two years ago. In its court filing, the company listed assets of $9.37 million and liabilities of $11.14 million. The mattress company recently closed 15 of its 49 stores and showrooms.