Lenders holding a majority of loans in a syndicated debt instrument notched another win in the non-pro rata refinancing wars when the U.S. Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court") issued a June 6, 2023 opinion approving confirmation of the Chapter 11 plan (the "plan") of Serta Simmons Bedding and its affiliated debtors ("Serta" or the "company"). In re Serta Simmons Bedding No. 23-90020 (DRJ) (Bankr. S.D. Tex. June 6, 2023) [ECF No. 1045] (the "opinion").

As discussed below, the opinion validates a non-pro rata "uptier" debt exchange transaction between Serta and a majority group of participating term lenders (PTLs) at the expense of certain non-participating minority lenders ("non‑PTLs") who claimed that the selective debt exchange violated the terms of the company's existing loan agreement issued in 2016 (the "loan agreement") and the covenant of good faith and fair dealing.

If the opinion survives intact on appeal (which began in April upon direct appeal to the U.S. Court of Appeals for the Fifth Circuit), favored lenders and distressed borrowers would have a circuit-level decision that permits exchange transactions that materially favor one set of lenders over another, potentially opening the door to more instances of what is known as "lender-on-lender violence."