Tempur Moves Up; Venetian Sells Grand Canal

Moody's Investors Service has upgraded Tempur-Pedic International's bank debt one notch to Ba3. The mattress and pillow-maker has experienced rapid growth in sales, free cash flow and operating profit in the last year. These factors, combined with a $52.5 million debt reduction following an initial public offering last December led to the move.

Moreover, "Part of the rationale for the upgrade is that we reduced debt from the company by executing a clawback on the [subordinated] notes," said Dale Williams, cfo of Tempur. He said the company will have to look at the credit agreements to see whether Tempur can reduce interest costs further.

GE Capital and Lehman Brothers lead the bank debt, having financed a 2002 buyout for Tempur by TA Associates and Friedman, Fleischer & Lowe. The senior debt includes a $20 million revolver, $10.2 million "A" loan and a $134.5 million "B" loan. Bank debt for Tempur World Holding Company Aps--a European holding company--was also upgraded from B1 to Ba3, affecting another $20 million revolver and a $64.5 million "A" loan. Tempur is benefiting from attractive industry demographics due to increased housing and furnishing purchases by baby boomers, Moody's noted.

* American Greetings has improved its credit profile through strong free cash flow and will use cash balances to tender for its $196 million senior subordinated notes. Moody's revised the company's rating to positive from stable, affirmed the $195 million revolver rating at Ba1 and upgraded both the senior and convertible subordinated debt ratings to Ba2 from Ba3.

The outlook revision and the upgrade recognize the material balance-sheet improvement achieved in recent periods, said Kevin Ziets, a Moody's analyst. American Greetings has maintained high profitability and cash flow measures, he stated. After the tender offer nearly $400 million of debt will have been reduced since the end of 2003. "American Greetings performs in a very competitive industry and its cost-cut initiative will enable the company to achieve savings and reinvest those savings into a growth strategy," said a spokesman for the card company.

* Venetian Casino Resorts financial flexibility will greatly increase by the sale of its Grand Canal Shoppes to General Growth Properties for $766 million. Flexibility had already improved after strong operating results through 2003 and now Moody's is considering upgrading the Las Vegas-based company's debt ratings. This includes Venetian's credit facility, consisting of a $294.6 "B" loan, a $48.3 million "A" loan and a $75 million revolver, all rated B1. There are also $850 million of second mortgage notes rated B3.