Introduction
Sleep Number Corporation filed for Chapter 11 on June 12, 2026, in the U.S. Bankruptcy Court for the Southern District of New York (Case No. 26-11399). It did not liquidate on the spot. It ran a court-supervised sale of substantially all of its assets, and that sale closed July 31.
For restructuring professionals, the case covers several moving parts at once:
- Consumer retail chain with 600 stores
- Roughly $672.5 million in prepetition secured debt
- Lender-backed DIP facility
- Stalking-horse bid that rose after auction
- Liquidation plan still awaiting confirmation
This article covers the company's background, why it failed, how the DIP and sale worked, and what to watch next. Status is as of October 20, 2026.
Key Takeaways
- Sale to SNBR, Inc. closed July 31 at a $529.5 million base cash price.
- A Joint Plan of Liquidation is pending; confirmation hearing is December 3, 2026.
- Roughly $267.4 million of proceeds repaid DIP liabilities; no stockholder proceeds are expected.
- Next to watch: the November 20 voting deadline and the December 9 governmental bar date.
What Happened: Sleep Number's Chapter 11 Filing and Business Profile
The business
Sleep Number designs, makes and sells adjustable-firmness smart beds, bases and bedding, mostly direct to consumers. In 2025, 88% of sales came through its stores and 12% through online, phone and chat channels.
As of January 3, 2026, it ran 600 stores in all 50 states with 3,133 team members. The company was founded in 1987 as Select Comfort. It opened its first store in 1992, went public in 1998, and took the Sleep Number name in 2017. Its stock traded on Nasdaq as SNBR.
The filing
Five debtors filed jointly:
- Sleep Number Corporation
- Select Comfort Retail Corporation
- Select Comfort Canada Holding Inc.
- Select Comfort SC LLC
- Sleep Number Health Corporation
The first-day declaration reported about $0.6 billion in assets and $1.3 billion in liabilities. First-day motions sought authority to:
- Pay certain critical and foreign vendors and 503(b)(9) claims
- Honor employee and customer obligations
- Keep cash management in place
- Pay taxes and continue insurance
- Reject certain leases
Chapter 11 is not a shutdown. The debtors kept operating, but only as long as court orders, DIP liquidity, vendor cooperation and the sale allowed.
Timeline
| Date | Event |
|---|---|
| June 12 | Petition filed; initial stalking-horse APA |
| June 15 | Interim DIP order |
| July 2 | Bidding procedures order |
| July 8 | Bid deadline |
| July 13 | Auction; SNBR, Inc. named successful bidder over Brooklyn Bedding LLC |
| July 21 | Sale order entered |
| July 31 | Sale closed |
| September 4 | Joint Plan of Liquidation filed |
| October 16 | Disclosure statement approved |
| November 20 / December 3 | Voting deadline / confirmation hearing |
For primary sources, go to the Kroll claims-agent docket, the petition, first-day declaration, sale and DIP orders, and SEC filings before relying on press coverage.
Why Sleep Number Filed for Chapter 11
Operating decline
The causes below are company-reported, not independent findings. Sales declined sharply:
- FY2025 net sales were $1,411.5 million, with comparable sales down 17% and a net loss of $132.0 million.
- Q1 2026 sales dropped 19% to $319 million, from $393 million a year earlier.
- Q1 gross margin slid to 57.9% from 61.2%, and the operating result swung from $2 million income to a $37 million loss.
Management pointed to several pressures:
- Weaker volume and soft macro conditions
- Winter weather and interest-rate uncertainty
- Inflation and tariffs
- A commoditized, highly competitive bedding market
Debt and covenants
The balance sheet left little room. At April 4, 2026, cash was just $1.484 million, against $605.6 million of credit facility borrowings and $348.0 million of operating lease liabilities.
The company reported a 4.1x leverage ratio against a 4.0x permitted maximum in its 10-K. It amended the credit agreement in November 2025 and signed a forbearance agreement and thirteenth amendment on April 27, 2026. The Q1 10-Q flagged substantial doubt about its ability to continue as a going concern.
Turnaround and alternatives
Management launched "Sleep Number Shifts" in November 2025, repositioned stores and cut costs. Advisers included Guggenheim Securities, AlixPartners and Davis Polk; Kent Percy of AP Services became CRO on June 12.
In March 2026 the company solicited recapitalization and bridge proposals. Only one written recapitalization proposal arrived, and it was not actionable. Existing lenders refused to consent to priming for bridge financing. That left incremental lender liquidity plus a sale process.
The debtors said a going-concern sale would preserve the brand, employees and customers, while lingering in Chapter 11 would accumulate administrative claims and interest.
How the Chapter 11 Sale and DIP Financing Work
The DIP facility
Case materials describe up to $260 million of DIP financing: up to $65 million of new money plus a $195 million roll-up. Up to $50 million was available on the interim order, with more subject to final approval.
Pricing was SOFR + 8.00% (or base rate + 7.00%), with a scheduled September 16, 2026 maturity. At closing, about $267.4 million of proceeds went to repay DIP liabilities. Fee, carve-out, milestone and final-order terms should be checked directly against the orders and credit agreement.
The Section 363 sale
A stalking-horse bid sets a floor, not a guaranteed outcome. Here's how this one played out:
- June 12: SNBR, Inc., an affiliate of Sleep Country Canada Inc., signed the initial APA at $415 million.
- July 2: The court approved bidding procedures.
- July 13: The auction proceeded with Brooklyn Bedding LLC as an additional bidder.
- July 18: The amended APA raised the base cash price to $529.5 million.
- July 21: The court entered the sale order.
- July 31: The sale closed.
Bid protections included:
- 3% break-up fee
- Expense reimbursement capped at $4 million
- $10 million minimum overbid
- 10% cash deposit for qualified bidders
Credit bids were allowed under the procedures. These terms deter lowball bids and set a clear bar for rival bidders.
Assets and liabilities
Acquired assets included inventory, goodwill and customer and referral relationships. Cash, including the customer-deposit balance, was excluded.
The buyer assumed specified liabilities only:
- Customer returns on previously sold merchandise
- Valid gift cards and certificates
- Certain unshipped customer orders
- Certain post-closing warranty obligations
Other seller liabilities stayed behind, and the purchaser is not generally a successor to them.
Creditor outcome
Prepetition secured lenders were owed about $672.5 million. With $529.5 million of proceeds and $267.4 million going to DIP repayment, secured recoveries and any residual for unsecured creditors depend on the pending liquidation plan. The company expects nothing for stockholders, and common stock will be cancelled when the plan takes effect.
What could still change
- Plan objections or a failed confirmation
- Disputes over claims or the U.S. Trustee's objections
- Appeals of the sale order
- Conversion if the plan can't be confirmed
Stakeholder Implications: Creditors, Landlords, Vendors, Employees, and Customers
Creditors and investors
Secured lenders took the first dollars of value, with DIP lenders repaid first. For unsecured creditors and claims buyers, the live questions are plan recoveries and claims reconciliation. An official unsecured creditors' committee was appointed June 23. The general bar date is September 10, 2026; the governmental bar date is December 9, 2026.
Landlords
With 600 stores and $348.0 million in lease liabilities, lease treatment was a central issue. The debtors moved to reject certain leases, and the sale procedures set assumption and assignment notices and a cure-cost objection deadline. Check the final lease schedule for cure amounts and designation rights.
Vendors, employees and customers
- First-day motions sought authority for critical and foreign vendor payments, including 503(b)(9) claims.
- The U.S. Trustee objected to the non-insider retention plan and disputed officer and director severance.
- Customers got limited protection: returns, gift cards, unshipped orders and some warranties moved to the buyer, but customer deposits stayed with the estates.
What to monitor
- Plan voting results (November 20) and the confirmation hearing (December 3)
- Objections to confirmation, including from the U.S. Trustee
- Claims objections and distribution mechanics
- Any wind-down structure or trust
BankruptcyData tracks court filings, advisors, stakeholder activity, milestones and historical outcomes across the Chapter 11 lifecycle, so you can compare Sleep Number with similar retail sale cases.
Frequently Asked Questions
What is the customer service phone number for Sleep Number bed?
Sleep Number's contact page lists 1-877-773-3641, plus live chat from 6 a.m. to 11 p.m. Central daily. A separate 1-888-411-2188 line is for accessibility assistance. Confirm on the official site, as details can change.
Who is Sleep Number owned by?
Before filing, it was publicly traded on Nasdaq as SNBR. The asset buyer was SNBR, Inc., an affiliate of Sleep Country Canada Inc., and the sale closed July 31. The debtor's common stock will be cancelled when the plan takes effect.
How hard is it to return a Sleep Number bed?
Eligible products carry a 100-night In-Home Trial. Some items, such as FlexFit adjustable bases, are final sale, and bedding and remotes have separate terms. Fees and pickup charges are not always easy to find, so confirm them in the official return policy before buying.
