Bedding Co. Sleeps Well; Domino's Plans IPO

National Bedding Company (NBC) has reduced its leverage, improved coverage ratios and made progress in integrating Sleepmaster, after buying the mattress company out of bankruptcy last year. Moody's Investors Service has upgraded NBC's bank debt to Ba3 from B1. The credit facilities comprise a $60 million secured revolver, $33 million "A" loan and $115 million "B" loan. "Given the comparable bedding company's ratings, our rating is directionally correct," said James Polark, NBC's cfo.

Moody's upgrade reflects the mattress manufacturer's increased scale and geographic diversity gained from the Sleepmaster acquisition. "A year ago NBC bought a company one-and-a-half times larger than us. At the time, Moody's had concerns about our liquidity and about the fact that the company was bigger than we were," Polark stated. "We've executed what we've planned, we delivered the results we had to give and Moody's responded accordingly," he added.

NBC's ratings are also supported by its strong credit statistics and cash flow profile as well as its significant leverage reduction. NBC recently amended its credit facilities with favorable pricing and covenant adjustments to reflect the debt reduction significantly in excess of requirements over the past year, Moody's notes. But NBC still needs to successfully complete the integration of Sleepmaster on the manufacturing and sales channel fronts.

* Moody's has placed the ratings of Domino's under review for upgrade following the company's announcement that it intends to undertake an initial public offering for at least $300 million. Domino's currently has a $663 million credit facility rated B1 and $403 million of 81/4% senior subordinated notes rated B3. Moody's expectation is that the proceeds will pay down debt.

The IPO will be made up of a primary offering and secondary sale from existing shareholders, Moody's says. The senior subordinated notes have an option redemption provision in which the company has the right, but not the obligation, to call up to 40% of the issue at 1081/4% of par with proceeds from primary equity offerings. A Domino's spokeswoman declined comment.