Moody’s gives Tempur Sealy notes B1

Moody’s Investors Service said it gave a B1 rating to Tempur Sealy International Inc.’s new senior unsecured eight-year notes. All of Tempur Sealy’s other ratings are not affected, including the B1 rating on the senior unsecured notes. The outlook remains positive and the speculative grade liquidity rating remains SGL-1.

The proceeds will be used for general corporate purposes, including refinancing the $600 million of senior unsecured notes due in 2026. Pending the repayment of these notes planned for June 2021 or earlier, the company will initially apply part of the net proceeds to reduce the balances under its accounts receivable securitization program and outstandings under its revolving credit facility with the remaining proceeds going towards cash.

“The refinancing favorably extends Tempur Sealy’s unsecured debt maturities to 2029 from 2026. Moody’s expects Tempur Sealy to repurchase 6% of its shares, which is credit negative because it increases debt and cash interest expense relative to levels without the buyback. However, Moody’s is taking no action on the Ba3 CFR or positive outlook because the company’s leverage remains low – estimated at 2.8x debt-to-EBITDA pro forma for the new issuance as of December 2020 – and the net effect of the refinancing will likely be a reduction in cash interest expense,” the agency said in a press release.

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