S&P places Tempur Sealy on watch

S&P said it placed its ratings on Tempur Sealy International Inc., including the BB+ issuer rating, on CreditWatch with negative implications.

The negative watch follows the news that Tempur plans to buy Mattress Firm Inc. for about $4 billion, the agency said.

“Tempur plans to fund the cash portion of the transaction using cash on hand and proceeds from a new secured and unsecured financing, a portion of which it will use to repay Mattress Firm's outstanding debt. We estimate S&P Global Rating-adjusted leverage could approach 4x on a lease-adjusted basis based on the latest 12-month results; however, if performance improves this could decline into the 3x to 3.5x area by the close of the transaction, which is expected in the second half of 2024, subject to regulatory approvals,” the agency said in a press release.

S&P said it plans to review the company's strategic rationale, reassess the combined business risk, analyze its financial plan, and discuss financial policies with management. “Upon resolution of our CreditWatch listing, we could affirm the ratings or lower them, likely up to one notch.”

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