Morningstar DBRS Finalizes Its Provisional Credit Rating of BB (low) With a Stable Trend on Sleep Country Canada Holdings Inc.'s Senior Unsecured Notes Issuance

DBRS Limited (Morningstar DBRS) finalized its provisional credit rating BB (low), with a Stable trend and a Recovery Rating of RR5, on Sleep Country Canada Holdings Inc.'s (Sleep Country or the Company, rated BB, Stable) $150 million 6.625% Senior Notes, due November 28, 2032 (the Notes).

Morningstar DBRS expects the net proceeds of the Notes issuance will be used to pay outstanding amounts owed under the Senior Credit Facilities. The Notes are senior unsecured obligations of the Company, 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 effectively subordinated to all senior secured indebtedness, including indebtedness under the Company's existing Senior Secured Credit Agreement. The Notes are 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 the 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.

The ratings listed above are based on the Second Supplemental Indenture, dated May 8, 2025; the Private Placement Memorandum dated May 1, 2025; and information provided by Sleep Country Canada Holdings Inc. to Morningstar DBRS as of May 8, 2025.

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.

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