Select Comfort Facing Grim Outlook For The Future

Posted by MCC on March 31st, 2009 at 07:36am

After an already rough year to say the least, Select Comfort was dealt another hard blow when their auditor expressed doubts of the companies ability to continue operations. The harsh statement means that in the very near future, the company may run out of funds to support it’s day to day operations.

New financing needs to be located to keep the company afloat. The company is already trying to attain more capital by issuing  some new debt or equity securities, a proposition that may not see much success with the current state of the economy.

If Select Comfort no longer has the funds to operate, the company could risk being in default under their Credit Agreement. Default would lead to the company no longer being able to continue productions.

Earlier this month Select Comfort received a $23 million federal tax refund which could have kept the company running, but the lender required that money to be placed in escrow until possible avenues of new financing are negotiated.

The ailing company has already taken steps to reduce overhead by cutting their capital expenditures and advertising costs and closing at least 55 retail stores. It’s too early to tell whether or not these cuts are going to be enough to save the company.

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