On December 21, 2017, Moody’s Investors Service downgraded Serta Simmons Bedding, LLC’s corporate family rating to B2 from B1, probability of default rating to B2-PD from B1-PD, $1.9 billion 1st lien secured term loan due 2023 to B2 from B1 and its $500 million 2nd lien secured term loan due 2024 to Caa1 from B3. According to Moody’s, the ratings downgrade was due to the Company’s weak operating performance and higher leverage than Moody’s had expected. “We had expected leverage to approach 6.0 times in 2017 from a combination of EBITDA growth and debt repayments with free cash flow,” said Kevin Cassidy, Senior Credit Officer at Moody’s. “But debt to EBITDA remains over 6.5 times as the company’s operating performance has been weaker than we expected,” noted Cassidy. Moody’s further states that the corporate family rating reflects its very high leverage at over 6.5 times debt to EBITDA and aggressive financial policies. Read more on distressed companies.
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