S&P cuts Serta Simmons

S&P said it lowered the ratings on Serta Simmons Bedding LLC and its first-lien term loan to CCC from CCC+. The agency also cut the rating on the second-lien term loan to CC from CCC-.

“The downgrade reflects our belief that the company’s capital structure is unsustainable. We expect operating performance to remain weak in 2019 because of Mattress Firm store closures and intensified competition in the industry. Serta Simmons’ leverage increased to 14.3x for the 12 months ended Sept. 30, 2019, up from 8.6x for the same period a year ago. The company’s revenues and EBITDA dropped by double-digit percentages through the nine months ended Sept. 30, 2019, as compared with the same period in 2018,” said S&P in a press release.

Serta Simmons’ overexposure to Mattress Firm caused a significant profit decline when it closed 20% of its stores following its November 2018 reorganization. The loss of Mattress Firm, market-share losses in the regional and independent channel and lower-priced Chinese imports resulted in high-double-digit percent unit volume declines for the first nine months of 2019, S&P said.

The outlook is negative.

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