Simmons Bedding Co.'s new $492 million term loan "D" was mostly inactive after it broke in the secondary last week, according to traders. Goldman Sachs leads the deal, which the company will use to refinance $490 million of secured and unsecured debt.
William Creekmuir, cfo, said he thought trading was inactive on the new loan because most investors moved straight into the new debt from the old credit, which resulted in little buying and selling. He added that its previous loan did not trade actively either. Pricing on the term loan "D" is LIBOR plus 2 1/4%. The new tranche replaces a $350 million term loan "C" priced at LIBOR plus 2 1/2% and a $140 million unsecured term loan priced at LIBOR plus 3 3/4%. Pricing on a $75 million revolver, which remains in place, was lowered 25 basis points to LIBOR plus 2 1/2%. Creekmuir said the company will save $3 million in interest payments annually from the price cut.
Goldman Sachs and the company came to a mutual agreement to lower pricing, he explained. Simmons' improved performance in the first quarter EBITDA increased 94% compared to the same quarter the year before as well as favorable bank conditions for issuers prompted the company to seek a price cut. Its EBITDA was $38.7 million compared to $19.9 million for the same period last year. Creekmuir said the improved performance was due to cost cutting measures and increased sales.
Standard & Poor's assigned a BB- rating to the bank loan and a 1 recovery rating. It also raised its rating on Simmons' $75 million revolver to BB- from B+ and assigned a 1 recovery rating, which indicates an expected 100% recovery if it defaults.