Serta's last fight is over who sees the bill

Six years after the 2020 exchange, the Serta Simmons uptier has a price. The current fight is over whether the market gets to read the itemized version.

This month's remand opinion from Judge Lopez applied Section 2.18(c)'s pro-rata sharing provision as written. As I wrote in last week’s blog, participating lenders took a non-pro-rata payment without purchasing participations from the excluded lenders for cash at face value, so damages came to roughly $261m, and New York's mandatory 9% statutory prejudgment interest running from the June 2020 closing carried the total above $400m. The court rejected the equitable defences - unclean hands and failure to mitigate - as beside the point on a contract claim governed by the agreement's plain language. The validity question was already settled: the Fifth Circuit held the exchange wasn't a permitted open market purchase, and the Supreme Court declined the appeal in November 2025.

Here’s the next chapter in the story: The excluded lenders filed their proposed form of judgment, and attached to it is an Apportionment Schedule - the breakdown of how the award falls across each lender that participated in the uptier. The defendants have asked for the schedule to be sealed. The excluded lenders' response is that no basis for sealing exists under the Bankruptcy Code, the Federal Rules of Civil Procedure, the Federal Rules of Bankruptcy Procedure or the local rules, and that the schedule belongs on the public docket alongside the judgment.

Liability under the opinion is several rather than joint, so the schedule isn't an accounting formality - it's the operative statement of each participating institution's exposure. The market has aggregate damages numbers for failed LMEs; it's never had the allocation across participants in clean, on-the-record form. Sealing in a public bankruptcy proceeding requires a justification the rules recognize, and that's the standard this dispute will be resolved against.

For the documents in your portfolio, the lesson is the one Serta has been teaching since 2020, now with better arithmetic. The participating lenders went through an exception already in the document - the open market purchase carve-out in Section 9.05(g). Six years and one Fifth Circuit opinion later, the exchange wasn't an open market purchase, and the pro-rata sharing protection applied in full. 

That's the gap a Serta blocker closes: it tightens what counts as an open market purchase and protects ranking as a sacred right. New issue packages now routinely include a Serta blocker: ranking and subordination protections drafted so a majority can't amend them away, strongest when they're on the sacred rights list. Post-Serta paper generally has some version; older paper often doesn't. The July opinion answered whether participating in a challenged uptier carries real litigation risk. If the Apportionment Schedule reaches the docket, we'll know what that risk cost each participant - on the record, in dollars.

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