Sealy to use cash flow to deleverage, eyes termination of conversion rights for convertibles

By Angela McDaniels

Tacoma, Wash., Oct. 6 - One of Sealy Corp.'s key priorities is deleveraging its balance sheet, according to an investor presentation included in an 8-K filing with the Securities and Exchange Commission.

As of Aug. 28, the company's debt included $295.74 million of 10 7/8% first-lien senior secured notes due 2016, $179.99 million of senior secured convertible pay-in-kind notes due 2016 and $268.95 million of 8¼% senior subordinated notes due 2014. Its leverage ratio was 5.2 times.

The company also has a $100 million asset-based revolver, which was undrawn as of Aug. 28.

Sealy plans to use free cash flow for opportunistic redemptions or market purchases of its senior notes.

The presentation noted that if the convertibles were converted in full, the leverage ratio would fall to 4.01 times.

Beginning on July 15, 2012, the company can terminate the convertibility of the notes if its stock price is greater than $2.50 and its leverage ratio, excluding the convertibles, is less than 3.4 times. The company's stock closed at $1.34 (NYSE: ZZ) on Wednesday.

Sealy is a bedding manufacturer based in Trinity, N.C.

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