** Shares of mattress seller Sleep Number SNBR.O plunges 65.4% to $0.37 premarket

** The Wall Street Journal reported on Wednesday that the firm is preparing to file for Chapter 11 bankruptcy, citing people familiar with the matter

** SNBR grapples with high debt as well as weakening performance and plans to use bankruptcy process to reorganize while keeping business intact, may also explore a potential sale - WSJ

** Firm has more than $600 mln in debt; has struggled with declining earnings and sales volumes

** SNBR subsequently obtained $55 million of incremental liquidity through a new $25 million term loan and $30 million of flexibility provided by existing lenders

** Reported a 19% drop in Q1 net sales, while net loss widened to $50 mln from $9 mln a year earlier

** Firm has said it has been pursuing a turnaround strategy centered on transforming its product portfolio, resetting its cost structure and launching new marketing initiatives

** As of last close, SNBR stock down 87.4% YTD