Sealy distributes rights to buy $177.13 million 8% PIK convertibles

By Angela McDaniels

Tacoma, Wash., May 28 - Sealy Corp. distributed rights to purchase $177.13 million principal amount of 8% senior secured third-lien pay-in-kind convertible notes due July 15, 2016 in a rights offering, according to a 424B5 filing with the Securities and Exchange Commission.

The convertibles will be co-issued by Sealy and Sealy Mattress Co. in $25 denominations and have a conversion price of $1 per share.

Beginning in 2012, Sealy will be able to terminate the convertibility of the notes upon the occurrence of specified conditions relating to the trading price of Sealy's common stock and its debt-to-EBITDA ratio.

Rights to subscribe for the convertibles were issued to Sealy stockholders of record as of Tuesday at the rate of one right per share.

Every 13 rights will allow the holder to purchase one convertible at a subscription price of $25. Stockholders will have the right to oversubscribe in the offering, subject to pro ration provisions.

The rights offering will expire at 5 p.m. ET on July 2, and the rights will be freely transferable by holders until that time.

The rights have been admitted for trading on the New York Stock Exchange under the symbol "ZZ RT," and Sealy will apply to list the convertibles on the NYSE.

Sealy Holding LLC, the company's majority shareholder and an affiliate of Kohlberg Kravis Roberts & Co. LP, has committed to purchasing its pro rata portion of convertibles in the rights offering and to acquire any convertibles that other shareholders do not purchase.

The rights offering is one element of the company's refinancing plan announced May 13, which also includes a new $100 million asset-based revolving credit facility due 2013 and $350 million principal amount of senior secured notes due 2016.

The refinancing plan is designed to strengthen the company's capital structure by enhancing its liquidity position, adding cash to the balance sheet and extending nearer-term maturities through 2013 and beyond, according to a prior company news release.

Citigroup Global Markets Inc. is the dealer manager for the rights offering.

Sealy is a bedding manufacturer based in Trinity, N.C.

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