Moody’s gives Mattress Firm B2, loan B1

Moody’s Investors Service said it assigned new ratings to Mattress Firm, Inc., including a B2 corporate family rating, a B2-PD probability of default rating and a B1 rating on the proposed $550 million new senior secured term loan due 2027.

“The B2 CFR reflects the company’s moderately high leverage, dependence on cyclical discretionary consumer spending, and narrow product focus in a highly competitive product category. As of Sept. 30, 2020 and pro forma for the refinancing transaction, Moody’s-adjusted debt/EBITDA will be at an estimated 4.1 times and EBITA/interest expense will be 1.8 times,” the agency said in a press release.

Proceeds from the proposed senior secured term loan, along with $184 million of balance sheet cash, will be used to repay the $465 million term loan and $192 million HoldCo loan. Proceeds will also be used to pay for loan prepayment premiums and transaction fees and expenses. The new financing will also include a proposed $125 million asset-based revolving credit facility (unrated).

Mattress Firm’s existing capital structure was put in place as part of its exit financing package upon emergence from bankruptcy on Nov. 21, 2018, which eliminated the majority of its $3.5 billion pre-petition debt.

The outlook is stable.

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