Filing Alert: Sleep Number Chapter 11

Update (Jun. 12, 2026): A comprehensive case summary is now available for the Chapter 11 bankruptcy filing of Sleep Number Corporation.

Sleep Number Corporation and its debtor affiliates⁽¹⁾, a Minneapolis, MN-based sleep wellness company that manufactures and sells customizable smart beds, mattresses and bedding accessories, filed for Chapter 11 protection on Jun. 12 in the U.S. Bankruptcy Court for the Southern District of New York.

The filing aims to effectuate a value-maximizing, going-concern sale of substantially all of the Debtors' assets under section 363, backstopped by a stalking horse bid from SNBR Inc., an affiliate of Sleep Country Canada Inc. ("Sleep Country"), and supported by the lenders and agent under the Company's Prepetition Secured Credit Facilities. Pursuant to the Stalking Horse APA dated June 12, 2026, the Stalking Horse Bidder has committed—subject to Court approval—to acquire substantially all of the Company's assets for $415 million in cash plus the assumption of certain liabilities, establishing the floor for competing bids. Building on a 14-week prepetition marketing process that solicited 53 strategic and financial parties (19 NDAs, five preliminary proposals), the proposed bidding procedures contemplate a compressed 26-day postpetition diligence period, a July 8, 2026 bid deadline, a July 13, 2026 auction, a July 15, 2026 sale hearing, and a closing by July 31, 2026.

The Company attributes its distress to a confluence of industry-specific and macroeconomic headwinds amounting to a historic mattress-industry recession—a secular consumer shift toward e-commerce that eroded in-store foot traffic, compressing sector margins, reduced discretionary spending, elevated inflation and interest rates, and a less dependable global supply chain. These pressures were compounded by the Company's pandemic-era overexpansion of its store footprint, manufacturing capabilities, and debt levels, which heightened leverage and impaired its ability to absorb prolonged headwinds, and by the April 2025 wave of U.S. tariffs—including IEEPA-based levies on certain direct-import products, followed by a February 2026 U.S. Supreme Court ruling that IEEPA does not authorize the President to impose tariffs, leaving the Company to navigate continuing regulatory uncertainty. Cost-cutting under CEO Linda Findley (appointed April 2025) reduced operating costs by $136 million versus 2024 and the Company monetized liquidity through the April 2026 Prepetition 2026 Term Loans and an IEEPA tariff-refund claim sale, but a parallel recapitalization outreach yielded only a single non-actionable proposal—and, with the existing lender group unwilling to consent to priming and no actionable junior or unsecured financing available, a going-concern sale emerged as the only viable path to preserve value.

Leading into the filing, the Debtors operated under a Forbearance Agreement and Thirteenth Amendment to the Prepetition Credit Agreement, entered April 27, 2026, which provided $25 million in incremental term loans, forbore against specified events of default, suspended the minimum-liquidity covenant through early July 2026, and imposed milestones toward a strategic transaction designed to pay the Prepetition Credit Agreement obligations in full. To fund the cases and the sale process, the Debtors secured a DIP facility from their existing lender group comprising up to $65 million in new money and up to $195 million in a roll-up of prepetition obligations converted on a 3:1 basis. Having canvassed 11 prospective alternative financing sources—none willing to lend on an unsecured or junior basis, and to whose priming proposals the prepetition lenders would not consent—the Debtors determined the negotiated DIP, with its calibrated sale milestones, offered the optimal financing to support a swift, value-maximizing sale process.

Sleep Number Corporation reports $642.3 million in assets and $1.3 billion in liabilities. The filing indicates that there will be funds available for distribution to unsecured creditors. The case number is 26-11399.

⁽¹⁾ For a complete list of debtor entities, see the Chapter 11 Debtors table.

Chapter 11 Debtors

Top Unsecured Claims

Key Parties

Counsel:

• Brian M. Resnick
  Davis Polk & Wardwell LLP
  Email: brian.resnick@davispolk.com

Financial Advisor / CRO:

• AP Services, LLC (Kent Percy)

Investment Banker:

• Guggenheim Securities, LLC

Real Estate Advisor:

• A&G Real Estate Partners

Signatories:

• Amy O'Keefe – Authorized Signatory

Claims Agent:

• Kroll Restructuring Administration, LLC

Equity Security Holders:

• Pacific Ridge Capital Partners, LLC – 10.9% Equity Interest

Bondoro Insights is continuing to monitor this case and will provide further coverage as appropriate.

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