S&P cuts Simmons view to negative

Standard & Poor's said it revised its outlook on Simmons Co. to negative from stable and affirmed its ratings, including the B corporate credit rating.

The agency said the outlook revision reflects its expectation that the cushion on the company's financial covenants could tighten over the next few quarters as a result of the sluggish housing market and reduced consumer spending.

While the company has shown strong sales growth over the second half of 2007, several companies in the bedding industry have experienced substantial softening of trends in recent months, which S&P believes reflects a broader industry slowdown. The agency also believes the company may find it difficult to improve credit measures over the next year amid continued softness in the U.S. housing market, a weak retail environment and rising raw material costs.

The speculative-grade ratings on Simmons reflect its narrow business focus, aggressive financial policy and highly leveraged financial profile, somewhat mitigated by the company's well-recognized brands, solid market position and the mattress industry's relatively stable demand and barriers to entry, S&P added.

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