(Reuters) – Foamex International Inc (FMXL.PK), which makes foam for bedding and cushions, on Wednesday filed for Chapter 11 bankruptcy protection for the second time in four years to restructure its debt.
The Media, Pennsylvania-based company first filed for Chapter 11 in September 2005 and emerged from bankruptcy protection in February 2007, with a reorganization plan that repaid creditors in full and allowed equity holders to retain their interests in the company.
It said the U.S. economic decline had forced it to file for bankruptcy again, as the U.S. housing and automotive markets, which it serves were particularly hit.
Consumers have been delaying purchases of big-ticket items like mattresses, furniture and automobiles as they pull back on spending generally.
Foamex is seeking bankruptcy court approval of up to $95 million in debtor-in-possession (DIP) financing provided by private equity firm MatlinPatterson Global Opportunities Partners III LP, which specializes in distressed investing, and Bank of America (BAC.N).
Companies rely on DIP financing to fund operations, including payroll and paying suppliers, while restructuring under bankruptcy protection.
Foamex said it had made “overly optimistic” projections about its anticipated financial performance in 2005 when it was trying to exit bankruptcy.
It had experienced one of its best years ever in 2005 and found that growth was not sustainable, it said in court documents. The company experienced a steady and dramatic decline in operating performance since the fourth quarter of 2006, it said.
“Although we have reduced debt by about $240 million to $380 million over the past two years, we cannot support the existing heavy debt load in the current operating environment,” Chief Executive Jack Johnson said in a statement.
Foamex employs about 2,300 people world wide and 31 manufacturing facilities located throughout the United States, Canada, Mexico and China, court filings showed.
In documents filed with the court, Foamex listed assets of about $364 million and liabilities of about $380 million.
The case is In re: Foamex International Inc, U.S. Bankruptcy Court, District of Delaware No.09-10560.
By Santosh Nadgir
(Editing by Jarshad Kakkrakandy)