In a recently filed Chapter 11 proceeding, Michael Lichtenstein, Co-Chair of the BCRGE assisted Classic Sleep Products in achieving an expeditious sale of substantially all of the debtor’s assets
January 29, 2010
JESSUP, MD – Only 25 days after filing for protection under the U.S. Bankruptcy Code, Judge Nancy V. Alquist today approved the sale of Classic Sleep Products to Classic Brands LLC, which was formed by the current management team and the company’s Chinese manufacturing partner.
Classic’s current management team led by CEO Mike Zippelli will 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,” said Zippelli. “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 added.
Zippelli said that several years ago he became convinced that Chinese manufactures like 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.
Xiong “Sam” Yu one of the partners in JMX offered these thoughts on the new relationship.
“Our relationship with Classic has enabled us to better understand and appreciate the U.S. home furnishings market. 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,” said Yu. “This deal will enable us to expand the depth of our relationship and we are quite excited about the opportunities for the future.”
In addition, Classic Brands and Delandis have embarked on constructing a new mattress manufacturing facility in Fujian, China to meet increased customer demand. Construction should be completed in 2011.
The Court’s approval of the restructuring plan and sale was approved in only 25 days, which Zippelli credited to the expertise of his legal and advisory team. Classic was represented by Michael J. Lichtenstein from the law firm of Shulman, Rogers, Gandal, Pordy & Ecker of Potomac, MD and Rob Katz from The Executive Sounding Board, a Philadelphia-based consulting firm.
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 and uses the finest materials from around the world including all-natural and high-performance covers, unique fibers, lamb’s wool, Talalay and Dunlop latex, and visco-elastic memory foam.
With its worldwide partnerships, the company is able to offer enhanced features on a wide range of value-driven products comprised of memory and latex foam that deliver unequalled comfort and value. Many of the premium products are manufactured domestically using handmade craftsmanship and custom embroidery.
Classic’s line of specialty foam products represents the fastest growing segment of the bedding market. They are designed to help customers get the maximum benefit out of each and every night’s sleep so they can lead more productive and healthy lives. You can visit Classic at the upcoming Las Vegas Furniture Market Building B Space 970 and In High Point at the IHFC Main Building 6th Floor. For more information, visit www.classicmattress.com.