Moody's downgrades Sealy

Moody's Investors Service said it downgraded Sealy Corp.'s corporate family and probability-of-default ratings to B1 from Ba3, first-lien credit facility rated Ba2 (LGD2, 25%) from Ba1 (LGD2, 23%) and subordinated notes to B3 (LGD5, 81%) from B2 (LGD5, 79%).

The downgrades are based on expectations that the company's operating performance will weaken due to the continuing deterioration in discretionary consumer spending, especially over the last month, according to the agency.

The outlook remains negative due to the uncertainty about the company's ability to comply with a financial covenant.

The downgrade also reflects Moody's concern about the company's ability to meaningfully reduce leverage in the near term based on our expectation of continued operating performance pressure, according to the agency.

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