Somnigroup Announces Successful Term Loan B Repricing

Rhea-AI Summary

Somnigroup International (NYSE: SGI) has successfully repriced its $1.6 billion Term Loan B due October 2031, reducing the applicable margin by 25 basis points from SOFR plus 2.50% to SOFR plus 2.25%. The company will receive an additional reduction to SOFR plus 2.00% if total net leverage falls below 3.0x adjusted EBITDA. Somnigroup plans to prepay $100 million of the outstanding term loan using cash and revolver borrowings. These actions are expected to generate annual cash interest savings of $5 million, with potential additional savings of $4 million if leverage targets are met. CEO Scott Thompson highlighted the repricing as a demonstration of lender confidence and emphasized the company's focus on generating free cash flow, reducing leverage, and delivering above-market returns to shareholders.

Positive

• Successful reduction of interest rate margin by 25 basis points on $1.6B Term Loan B
• Potential for additional 25 basis point reduction if leverage targets are met
• Expected annual cash interest savings of $5 million, with potential additional $4 million in savings
• $100 million prepayment of term loan demonstrates strong cash position
• Lender confidence in company's financial position

Negative

• Additional debt through revolver borrowings to fund loan prepayment
• Company still maintains significant debt load with $1.6B Term Loan B

Insights

Corporate Finance Analyst

Somnigroup's loan repricing cuts interest costs, saves $5-9M annually, signals lender confidence, and incentivizes healthier debt levels.

Somnigroup has successfully reduced its borrowing costs on a substantial $1.6 billion Term Loan B by securing a 25% basis point rate reduction (from SOFR+2.50% to SOFR+2.25%). This repricing, combined with a planned $100 million principal prepayment, will generate approximately $5 million in annual interest savings. The structure includes an additional performance incentive - if Somnigroup maintains leverage below 3.0x adjusted EBITDA, they'll receive another 25% basis point reduction, potentially adding $4 million more in annual savings.

This transaction reveals several positive indicators about Somnigroup's financial position:

• Lender confidence: Financial institutions typically only offer rate reductions to borrowers with improving risk profiles
• Cash flow enhancement: The $5-9 million annual interest savings directly improves free cash flow without requiring operational changes
• Proactive liability management: Rather than maintaining status quo, management is actively optimizing their capital structure
• Strategic incentives: The leverage-based step-down mechanism aligns management focus with balance sheet health

The $100 million prepayment will use both existing cash and revolver borrowings, suggesting comfort with their overall liquidity position. The CEO's explicit mention of "reducing our leverage ratio" indicates a broader deleveraging strategy rather than merely shifting debt between facilities.

While the immediate savings represent a modest percentage of the total loan amount, these efficiency improvements compound significantly over the remaining term through 2031. This transaction exemplifies how effective treasury management creates incremental shareholder value through improved capital efficiency without requiring dramatic operational changes.

DALLAS, June 18, 2025 /PRNewswire/ -- Somnigroup International Inc. (NYSE: SGI, "Company" or "Somnigroup") today announced the successful repricing of its $1.6 billion Term Loan B due October 2031.

The loan was repriced with a reduction to the current applicable margin by 25 basis points, from SOFR plus 2.50% to SOFR plus 2.25%, with a further step-down to SOFR plus 2.00% if total net leverage is below 3.0x adjusted EBITDA per the Company's credit agreement ("adjusted EBITDA"). Concurrent with the repricing, the Company intends to prepay $100 million of the outstanding term loan B principal balance with cash on hand and revolver borrowings. The Company estimates the repricing and prepayment will produce annualized cash interest savings of approximately $5 million, with the opportunity to realize further annualized cash interest savings of $4 million if total net leverage is below 3.0 times adjusted EBITDA.

Scott Thompson, Somnigroup Chairman and Chief Executive Officer, commented, "We are very pleased to announce this successful debt repricing, which demonstrates continued lender confidence in Somnigroup and our team's dedication to maintaining a strong financial position. The team is focused on driving our robust free cash flow, reducing our leverage ratio and delivering our shareholders above market returns."

Forward-Looking Statements

This press release contains statements that may be characterized as "forward-looking," within the meaning of the federal securities laws. Such statements might include information concerning one or more of the Company's plans, objectives, goals, strategies, and other information that is not historical information. When used in this release, the words "estimates," "expects," "intends," and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to future performance and debt leverage expectations. Any forward-looking statements contained herein are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations, meet its guidance, or that these beliefs will prove correct. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

About Somnigroup

Somnigroup (NYSE: SGI) is the world's largest bedding company, dedicated to improving people's lives through better sleep. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams. Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy®, Stearns & Foster®, and Sleepy's®, and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored solutions.

Somnigroup Investor Relations Contact

Aubrey Moore
Investor Relations
Somnigroup International Inc.
800-805-3635
Investor.relations@somnigroup.com

 

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SOURCE Somnigroup International

FAQ

What is the new interest rate for Somnigroup's Term Loan B after repricing?

The new interest rate is SOFR plus 2.25%, reduced from SOFR plus 2.50%, with potential further reduction to SOFR plus 2.00% if total net leverage falls below 3.0x adjusted EBITDA.

How much will Somnigroup save annually from the loan repricing?

Somnigroup expects to save approximately $5 million annually, with potential additional savings of $4 million if leverage targets are met.

How much is Somnigroup prepaying on their Term Loan B?

Somnigroup plans to prepay $100 million of the outstanding term loan balance using cash on hand and revolver borrowings.

When does Somnigroup's Term Loan B mature?

The Term Loan B is due in October 2031.

What is the total size of Somnigroup's Term Loan B?

The Term Loan B is $1.6 billion in total.