Moody's cuts Serta Simmons

Moody's Investors Service said it downgraded Serta Simmons Bedding, LLC's corporate family rating to Ca from Caa3, probability of default rating to Ca-PD from Caa3-PD, first-lien super-priority first-out term loan to B3 from B2, first-lien super-priority second-out term loan to Ca from Caa2, and first-lien term loan to C from Ca.

“These downgrades capture Moody's view that a debt restructuring is likely as Serta Simmons' liquidity and solvency position face acute pressure from $1.9 billion of debt maturities that come due in the second half of 2023. Serta Simmons' capital structure is untenable due to weak operating performance, very high leverage, and a high-interest rate burden. Liquidity is weak relative to the company's expected cash uses over the next year to service debt, working capital, and capital expenditures,” Moody’s said in a press release.

The agency said it estimates Serta Simmons will post negative free cash flow of $125 million to $145 million over the next 12 months (including cash priority term loan interest payments that the company records as a financing outflow).

The outlook is negative.

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