ON September 25, 2009, SIMMONS made a press release saying that it had $1.0 billion of debt requiring a restructuring plan that includes a Chapter 11 bankruptcy relief for the company and its domestic subsidiaries. The company intends to sell itself to investors in bankruptcy, and, through a series of financial transactions will reduce its debt from $1.0 billion to about $450 million. The announcement: SIMMONS announces restructuring plan; simmons signs purchase agreement with investor group led by ares management LLC and Ontario Teachers’ Pension Plan; significant majority of noteholders support the terms of the restructuring plan; restructuring plan provides for full payment to senior lenders, suppliers and employees and continued investment in 139-year-old brand.
SIMMONS has the well-known ‘Beauty Rest’ brand of beds and is synonymous with beds and mattresses worldwide. It employs 4 thousand employees and was founded in a small city in Wisconsin. The company has been profitable for a century until different sets of investments group bought and sold the company in the last 2 decades, causing the company to incur a tremendous amount of debt in the process. 1,000 employees were laid off last year to cut expenses so it could service its heavy debt load. However, cutting the work force 25% alone was not enough to ensure that the company could survive as an ongoing concern in the future. $1.0 billion of debt was too much for the company to handle specially with reduced demand for beds in the current recession. Many people decided to keep their old mattresses and keep the millions of dust mites in their old mattresses as permanent houseguests rather than purchase new beds, which may strain their finances if they got laid off. The employment or rather the unemployment situation nationwide remains bleak at 10% and with California nearing 12%. I have seen several clients where both spouses were laid off. However, Obama claims that the various stimulus packages have worked creating over a million jobs. The problem appears to be that nobody seems to know where these new jobs are. Maybe these jobs are not in the United States but somewhere in China. The Chinese are jubilant over the fact that Obama is now in China discussing how the get the US economy going again with China’s help because for the first time in history, China is discussing matters with the United States as equals. China really has no choice but to help the American economy get going again because China owns a significant chunk of the US treasury notes. If the American economy goes under for good, all of the US promissory notes that China holds will become worthless scraps of paper.
Thus, the problem of having too much debt creates fatal consequences even in large businesses and in superpowers. There is no difference. Too much debt will kill even the most profitable of businesses and the most powerful of countries. Our beloved America is no exception. The current administration is borrowing and printing so much money that the money in circulation has doubled in a matter of 12 months, and the borrowing and printing still continues without abatement. I’m not sure where the new jobs are going to come from. Even though new technology inventions are done here in America, the commercial applications in terms of finished product ready to be sold are produced in factories in Asia because of their lower costs of production there. Thus, it looks like the employment generation will be to their benefit not ours. Americans will be reduced to a nation of shopkeepers peddling goods produced in Asia with technology invented in America. We do not want to see this kind of America. Borrowing and printing of more money must stop immediately, and manufacturing of things must be done here again through American innovation, genius and hard work.
If you have too much debt, seriously consider bankruptcy. Even Donald Trump will tell you that.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published November 21, 2009 in Asian Journal Los Angeles p. C4)
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