Bankruptcy Court Rules for HSG Clients in Landmark “Uptier” Trial, Awarding $400 Million in Damages

In a closely watched trial with major implications for the syndicated loan marketplace, the U.S. Bankruptcy Court for the Southern District of Texas ruled on July 7 for lenders, including those represented by HSG, that were excluded from the controversial 2020 restructuring of Serta Simmons Bedding’s debt. The court awarded approximately $261 million in damages plus a mandatory 9% annual interest rate running from June 2020 for a total recovery exceeding $400 million.

The trial was the latest round in a landmark case adjudicating the consequences of an “uptier” transaction in which a group of participating lenders exchanged their existing debt for new, higher-priority debt. Such transactions have the effect of pushing the excluded lenders, including HSG’s clients here, down in the repayment hierarchy. Judge Christopher Lopez found that the transaction constituted a payment under the credit agreement, which triggered a provision requiring proceeds to be shared pro rata among all lenders.

The ruling is the latest chapter in litigation HSG has pursued on behalf of issuers of collateralized loan obligations managed by LCM since the transaction closed in June 2020. In December 2024, HSG secured a ruling from the U.S. Court of Appeals for the Fifth Circuit striking down the debt transaction and reversing the portion of Serta’s bankruptcy plan requiring participating lenders to be indemnified against claims arising from it.

Vincent Levy led the trial team, supported by partner Neil Lieberman and associates Brian Goldman and Aaron Mattis.