Morningstar DBRS Assigns Provisional Credit Rating of (P) BB (low) to Sleep Country Canada Holdings Inc.'s Senior Unsecured Notes Issuance
ConsumersDBRS Limited (Morningstar DBRS) assigned a provisional credit rating of (P) BB (low), with a Stable trend to Sleep Country Canada Holdings Inc. (Sleep Country or the Company; rated BB, Stable) proposed $150 million 6.625% Senior Unsecured Notes. The Senior Unsecured Notes rating is based on a recovery rating of RR5.
The Company intends to use the proceeds to pay outstanding amounts owed under its Senior Credit Facilities. The Notes are expected to be senior unsecured obligations, and rank pari-passu in right of payment with any existing and future senior unsecured indebtedness, and senior in right of payment to all existing and future subordinated indebtedness of the Issuer. The Notes are expected to be effectively subordinated to all senior secured indebtedness, including indebtedness under the Company's existing Senior Secured Credit Agreement. The Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of Sleep Country's existing subsidiaries that are guarantors under the existing Senior Secured Credit Agreement.
The credit ratings continue to be supported by Sleep Country's strong market position within the Canadian sleep specialty retail industry, solid retail brand strength and brand portfolio, and strong free cash flow generating capacity. The credit ratings also take into consideration the intense competitive environment within the industry, the Company's exposure to economic cycles, and risks associated with acquisitions.
The credit rating assigned to this newly issued debt instrument is based on the credit rating of an already-outstanding debt series of the above-mentioned debt instrument. Please refer to our previous press release "Morningstar DBRS Assigns an Issuer Rating of BB and Provisional Senior Unsecured Notes Rating of (P) BB (low) to Sleep Country Canada Holdings Inc., Stable Trends "for more information, including all relevant disclosures.
A provisional rating is not a final rating with respect to the above-mentioned securities and may change or be different than the final rating assigned or may be discontinued. The provisional rating listed above is based on the draft Description of Notes, dated April 24, 2025; the draft Private Placement Memorandum, dated April 24, 2025 and information provided by Sleep Country Canada Holdings Inc.'s to Morningstar DBRS as of May 1, 2025. The assignment of final ratings is subject to receipt by Morningstar DBRS of all information and final documentation that Morningstar DBRS deems necessary to finalize the rating.
Continuation of the rating is subject to the provision to Morningstar DBRS of timely and sufficient information and/or data for the purposes of monitoring the above-noted rating.
Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577
Ratings
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.