Serta: from a mattress to standard-form contract language

It was a big splash when news of the bankruptcy filing broke.

Serta, of course, is a well-known mattress company, around since 1931. [Not a year full of economic optimism -- it must have taken some contrarian gumption to start it then.]

Whatever mattress you use at home, dear reader, you have almost certainy slept on a Serta if you have spent a night at a Hilton or Wyndham.

Anyway, back in 2020 the company was in trouble, and it executed what became a very controversial transaction to lessen its total debt burden It is called an uptier deal, because it allowed certain favored creditors to move up on the capital stack, to end up that I which positions more senior than they had before.

The creditors who had been excluded from this deal cried bloody heck.

They had reason to be worried. The creativity that deal showed did not in fact rescue the company from its woes and in early 2023 it filed for bankruptcy court protection.

A lot else has happened in the three years plus since then. Lenders routinely now include "Serta clauses" in transactions with their business borrowers to the effect that "we will never be on the excluded side of an uptier."

It is a neat story, but I suspect my readers have just now learned as much about it as you care to.

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