Today's Bankruptcy Monitor: Foamex Redux

Just when we thought today, contrary to statistical expectations, may be bankruptcy free, Foamex came out of left field with its first day motions. The company, which had emerged from its most recent bankruptcy in early 2007, was impacted by a drop in auto sales and mattress products, its two key end markets, while laboring under a massive debt load. The company has obtained $95 million of DIP commitments from Bank of America and MatlinPatterson, which is trying to put new capital to good use and quickly forget about its disastrous investment in Thornburg Mortgage.

While not definitive, it is likely these entities were in the capital structure previously; however one certain loser from the transaction is DE Shaw, whose distressed group had owned 191 million shares of Foamex stock as a result of the rights offering in its prior bankruptcy (and the resulting loss in capital cost certain high placed individuals at DE Shaw Distressed their jobs).

Foamex must have copied this clip in its press release from the last time it filed for bankruptcy:

Foamex will use chapter 11 to implement its balance sheet restructuring initiatives, which are designed to restore the Company’s business to long-term financial health, while continuing to operate in the normal course of business. Foamex anticipates that its day-to-day operations will continue as usual without interruption during the chapter 11 process, which is expected to last approximately six months.

We have heard that before.

Foamex has hired Akin Gump as legal counsel. It apparently did not use the repeat services of Miller Buckfire, and instead opted for Houlihan Lokey with the hope that this time it might actually emerge with a manageable debt load.

****Update****

Nope, not one...two bankruptcies today. Consulting company BearingPoint folded as well. Read about it here. Sphere: Related Content

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