Serta Simmons Bedding which is a major manufacturer of…beds, has been downgraded by S&P to CCC-. The outlook is Negative. The 2023 Term Loan that trades in the debt markets is discounted nearly 60%. The ratings group is worried about liquidity and weak operating results.
For our part, we have the well known company rated at a Corporate Credit Rating of 4, as discussed in our earlier articles dating all the way back to August 19, 2019. Obviously, we’d not anticipated the current situation at the time, but the likelihood of the company climbing back up the 5 point rating system to performing status seems ever less likely.
The only BDC with exposure remains Barings BDC (BBDC), which took on this apparently “safe” borrower back in the IIIQ 2018 as part of its “safety first” strategy on becoming a public BDC following the acquisition of Triangle Capital. That’s not working out as planned here, with the $3.9mn in debt exposure at cost in the 2023 loan was already written down by (19%) at year end 2019. If the value remains unchanged, the three quarter of a million dollar unrealized loss could triple, or worse. Not a huge position because – thankfully – BBDC also chose to build a very “granular” defensive portfolio which may yet serve them well. Serta Simmons, though, looks like an almost certain loss maker.