Blue Torch Capital has decided to buy bankrupt pillow maker Pegasus Home Fashions Inc. from H.I.G. Capital, which took over the company two years ago.
(Bloomberg) — Blue Torch Capital has decided to buy bankrupt pillow maker Pegasus Home Fashions Inc. from H.I.G. Capital, which took over the company two years ago.
Under the deal, which must be approved by the judge overseeing Pegasus’ bankruptcy, affiliates of Blue Torch have agreed to be the stalking horse, or lead bidder, at an auction for the company, according to court filings. The value of the deal is likely to be made public once court papers with more details are filed in the Chapter 11 case.
Pegasus filed for bankruptcy Thursday in Wilmington, Delaware after a cash crunch and management turmoil caused by the sudden departure of its co-founder and longtime chief executive officer, Carmine Spinella, the company said in a filing.
“After he abruptly resigned from the company earlier this year, the debtors were left with a leadership void at a critical juncture, creating uncertainty and instability within the organization,” said Timothy Boates, a restructuring adviser said in an affidavit.
The company hired independent directors earlier this year as it worked on a rescue plan, Michael Nestor, an attorney representing Pegasus, said during a court hearing Friday.
Carmine and Gail Spinella founded Pegasus in 1990, building it into a maker of polyester-fiber-filled pillows and other bedding sold through major retailers including Walmart Inc. and Costco Wholesale Corp., according to court papers. H.I.G.’s affiliates began owning 85% of the company in 2021, with Carmine Spinella owning the rest.
The company has sold more than $100 million in goods annually since 2021. It owes lenders nearly $80 million, including a $64 million term loan administered by Blue Torch Finance.
Blue Torch stepped in to help Pegasus when H.I.G. declined to provide it with a cash injection it needed late last year, according to court documents. It later agreed to bankroll the reorganization with a $5 million loan. On Friday, US Bankruptcy Judge Mary Walrath approved the Blue Torch loan and a related refinancing package worth about $15 million.
As part of the cash infusion from Blue Torch, H.I.G. reduced its equity in Pegasus, and a holding company formed by lenders became a shareholder, according to court papers. Spinella is still a minority owner.
The case is Pegasus Home Fashions, Inc. 23-11235, US Bankruptcy Court, District of Delaware (Wilmington)
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