updated 7/19/2010 3:48:48 PM ET 2010-07-19T19:48:48

Jennifer Convertibles Inc. filed for Chapter 11 bankruptcy protection following liquidity problems, the sofabed seller said Monday.

The company agreed with its largest creditor and foreign supplier Haining Mengnu Co. to convert a large part of its pre-filing debt into equity of the company.

Jennifer Convertibles, based in Woodbury, N.Y., says it was unable to get alternative financing to avoid filing for bankruptcy protection.

The company, which filed its petition in the Southern District of New York, plans to keep operating and emerge from bankruptcy reorganization as a going concern. It does not expect the filing to hurt its fulfillment of existing or future customer orders.

"I am confident that we will emerge as a stronger organization that will better satisfy our customers, suppliers and employees," said CEO Harley Greenfield. "By agreeing with Mengnu in advance of the filing, we will be in a great position to proceed with an expeditious restructuring through bankruptcy which will provide us with a viable capital structure as well as additional financing."

Jennifer Convertible's general bankruptcy counsel is Olshan Grundman Frome Rosenzweig & Wolosky LLP and its financial adviser is TM Capital Corp.

Jennifer Convertibles operates 142 namesake stores and 12 Jennifer Leather stores across the U.S. It also owns 154 Ashley Furniture HomeStores and licenses five others.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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