SSG Capital Advisors, LLC (“SSG”) served as the investment banker to Pegasus Home Fashions, Inc. and its affiliated entities (collectively, “Pegasus” or the “Company”) in the sale of substantially all its assets to an affiliate of Blue Torch Capital LP (“Blue Torch”). The sale was effectuated through a Chapter 11 Section 363 process in the U.S. Bankruptcy Court for the District of Delaware. The transaction closed in December 2023.

Founded in 1990 and headquartered in Elizabeth, NJ, Pegasus is one of the largest manufacturers and distributors of bedding products in the United States. Specializing in the manufacture of fiber and foam-filled pillows, the Company also wholesales a selection of ancillary bedding basics such as mattress pads, toppers, and pillow protectors. Products are marketed under the Company’s proprietary brands, including EZ Dreams®, ISO-Pedic®, America’s Pillow, and Essence of Bamboo, among others, as well as a broad portfolio of licensed and private label brands. Pegasus serves leading customers within the mass-market, warehouse club, and specialty channels.

Following the sale of the Company to a private equity fund in 2021, the Company faced challenges including significant liquidity constraints and the sudden departure of the Company’s CEO. The Company hired an interim CEO, who immediately embarked on a value-creation and optimization plan to stabilize the business. Despite these efforts, market fluctuations, rising commodity and raw material prices, and an increasingly competitive environment led to a decline in revenue and margins, further straining liquidity. The Company filed for bankruptcy protection with a stalking horse credit bid from Blue Torch in August 2023 to secure additional funding and explore available alternatives to the stalking horse proposal.

SSG was retained to conduct an accelerated marketing process during the bankruptcy and solicit competing offers to the stalking horse bid from potential strategic and financial acquirers. After extensive marketing and discussion with numerous interested parties, the stalking horse credit bid submitted by Blue Torch was determined to be the highest and best offer for substantially all the Company’s assets. SSG’s extensive Chapter 11 transaction experience and knowledge of the industry resulted in a process where value was maximized in an expedited time frame.

Blue Torch is a direct lender and investment manager that seeks to invest in middle-market companies.

Other professionals who worked on the transaction include:

• Timothy Boates, Chief Executive Officer of Pegasus Home Fashions, Inc., and Patrick Carew of RAS Management Advisors, LLC, financial advisor to Pegasus Home Fashions, Inc.;
• Michael R. Nestor, Kenneth J. Enos, S. Alexander Faris, Rebecca L. Lamb, Emily C.S. Jones and Kristin L. McElroy of Young Conaway Stargatt & Taylor, LLP, bankruptcy counsel to Pegasus Home Fashions, Inc.;
• Adam C. Harris, Gregory D. Ruback, Reuben E. Dizengoff, Lauren M. Troeller, Julia R. Cummings, Theodore A. Keyes and Yessenia Gonzalez of Schulte Roth & Zabel LLP, counsel to Blue Torch Capital LP;
• Mark S. Indelicato and Jacob T. Schwartz of Thompson Coburn LLP, counsel to Webster Business Credit Corporation;
• Adam G. Landis, Matthew B. McGuire and Nicolas E. Jenner of Landis Rath & Cobb LLP, local counsel to Webster Business Credit Corporation and Blue Torch Capital LP;
• Jeffrey L. Cohen, Eric S. Chafetz, Bruce S. Nathan, and Jordana Linder Renert of Lowenstein Sandler LLP and Eric J. Monzo and Brya Michele Keilson of Morris James LLP, counsel to the Unsecured Creditors Committee; and
• Mark Greenberg, Seth A. Waschitz, Gibbons Sinclair and Manuel Luna of Alvarez & Marsal, financial advisor to the Unsecured Creditors Committee.