Moody’s: Mattress Holding unchanged

Moody's Investors Service said that Mattress Holding Corp.'s plan to raise an incremental $730 million term loan as part of its financing of the Sleepy's acquisition has no impact on Mattress Firm's debt ratings.

The company's B1 corporate family rating, B1-PD probability of default rating, SGL-2 speculative grade rating and Ba3 rating of the term loan are unchanged.

The outlook remains stable.

The $730 million incremental term loan, along with $50 million of revolver borrowings, $32 million of existing Sleepy's mortgages, $19 million non-ownership interest in Sleepy's headquarters mortgage and $10 million equity rollover will be used to finance the $840 million transaction, including the $780 million Sleepy's purchase price, Moody’s said.

Mattress Firm also plans to upsize its asset-based revolver to $200 million, the agency added.

Most terms in the credit agreement are expected to be substantially unchanged, but could include a slight increase in the interest rate, Moody’s said.

The deal is expected to close Feb. 3, the agency said.

The deal will raise leverage and operational risk in the short term, but will bring significant strategic benefits, along with earnings and cash flow that will allow for de-leveraging, Moody’s said.

The acquisition will provide the company with a dominant position in the Northeast, boost its presence in the mid-Atlantic states and in Chicago, the agency said, and result in meaningful synergies over time.

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