U.S. Bankruptcy Court for the Southern District of Texas Upholds “Uptier” Transaction in Serta Bankruptcy Case | JDSUPRA

Case: Serta Simmons Bedding, LLC v. AG Centre Street Partnership (In re Serta Simmons Bedding, LLC), No. 23-90020 (Bankr. S.D. Tex. June 6, 2023)

The United States District Court for the Southern District of Texas recently ruled that “uptier” transactions are permissible open market transactions in bankruptcy.  The case arose out of transactions made by Serta Simmons before it entered into Chapter 11 bankruptcy, wherein its lenders issued new loans in exchange for higher priority.  When the transactions were challenged, Serta asserted that they were permissible open market transactions, and the District Court agreed, holding that participation by the rest of Serta’s lenders was not required under Serta’s credit agreement.

“Notably, the court stated that ‘[l]ender exposure to these types of transactions can be easily minimized with careful drafting of lending documents’ and ‘[s]uch an outcome was not only foreseeable, it is the only correct result.’”

Source: U.S. Bankruptcy Court for the Southern District of Texas Upholds “Uptier” Transaction in Serta Bankruptcy Case