Court Approves Classic Sleep Sale and Restructuring Plan

January 31, 2010  by in UnCategorized   

By Home Furnishings Business in Bankruptcy on February 1, 2010 Classic Sleep Products, Jessup, Md., has received court approval for the sale of Classic Sleep to Classic Brands LLC, which was formed by the current management team and the company's Chinese manufacturing partner.

The approval from Judge Nancy V. Alquist came 25 days after Classic Sleep filed for protection under the U.S. Bankruptcy Code allows the management team led by CEO Mike Zippelli to increase its majority ownership stake in the business with funding provided by JMX Capital Partners and Classic's senior lender, CIT Commercial Services.

JMX is partially owned by Xiong Yu of Delandis Trading Corp. of Fujian, China, and Classic's long-time manufacturing partner. Together, the parties are contributing $10 million to recapitalize the company.

"Classic Brands creates a new paradigm in the mattress industry with this transaction; superior U.S. design, engineering, sales, logistics and marketing; and world-class, state-of-the-art Chinese manufacturing, all harnessed to deliver incredible value to our customers," Zippelli said. "We see this move as a very exciting opportunity to solidify Classic's position as one of the leading value brands in the United States. This strong infusion of capital will strengthen our current business and position the company for dynamic future growth."

Zippelli added that what makes this deal different than other Chinese-U.S. partnerships is that Classic is using all its manufacturing specifications and quality controls to produce its value-priced line-up in China, not like others who are just importing beds produced by Chinese manufacturers.

"This is not a license deal, but rather our own people working in China to produce a better made value-priced mattress," he said.

Zippelli said that several years ago he became convinced that Chinese manufactures such as Delandis, who were building state-of-the-art manufacturing facilities with the latest equipment and quality control procedures provided a real competitive advantage over domestically produced goods, especially quality memory foam mattresses. So instead of competing, he focused on how best to create a marriage between the companies.

"When you look at the traditional problems a Chinese manufacturer has in entering the U.S. market, the lack of a sales force, communication issues, poor customer service and logistics, this was something our domestic team excelled at. Meanwhile, they could make a fantastic product well below our domestic cost. Together, we have become quite a team," he said.

"Our relationship with Classic has enabled us to better understand and appreciate the U.S. home furnishings market," said Xiong "Sam" Yu, a partner in JMX. "Working with Mike and his team, we were able to foresee many of the problems other Chinese manufacturers have had in terms of navigating the U.S. market and it has made our relationship very successful for both parties. This deal will enable us to expand the depth of our relationship and we are quite excited about the opportunities for the future."

Classic Brands and Delandis are building a new mattress manufacturing facility in Fujian, China to meet increased customer demand. Construction should be completed in 2011.

The company said there will be no disruption of service to its customers, vendors or suppliers during the transition process. The deal is expected to close several weeks. Classic Sleep Products sells its bedding products and accessories under the Dormia, Space Age and Natural Expressions brands.