NTK Holdings Inc. (Nortek), a Providence, R.I.-based maker of ventilation, air conditioning and heating products, said that it will file for bankruptcy protection as part of a restructuring agreement with its lenders. THL Partners acquired NTK from Kelso & Co. in 2004, and held a 66.48% equity stake as of late 2007, when NTK canceled a proposed $690 million IPO.
NTK Holdings, Inc. (“NTK Holdings”), and Nortek, Inc. (“Nortek” and collectively with NTK Holdings, the “Company”) today announced that the Company has entered into a Restructuring and Lockup Agreement with a substantial portion of its bond holders to effectuate a comprehensive restructuring of the Company’s debt (the “Agreement”). When concluded, the Agreement will eliminate approximately $1.3 billion in total indebtedness, providing considerable financial strength and flexibility to the Company’s balance sheet.
Richard L. Bready, Chairman and Chief Executive Officer, said, “This transaction will immediately rebuild Nortek’s financial strength, providing us the flexibility for growth and a solid foundation for long-term stability.”
Under terms of the Agreement, holders of Nortek’s 8 1/2% Senior Subordinated Notes due 2014 (“8 1/2% Notes”) will exchange their debt for substantially all of the equity of the Company. Holders of NTK Holdings’ 10 3/4% Senior Discount Notes due 2014 (“10 3/4% Notes”), Nortek’s 9 7/8% Series A and Series B Senior Subordinated Notes due 2011, and the lenders under NTK Holdings’ Senior Unsecured Loan Agreement will also exchange their debt for equity in the Company. In addition, under the Agreement, the indebtedness under Nortek’s 10% Senior Secured Notes due 2013 (“10% Notes”) will either be modified and receive some portion of the equity of the Company, or reinstated. In either case, the original principal amount of the 10% Notes of $750 million will remain outstanding.
The Company has entered into the Agreement with certain holders of, in aggregate, at least 66-2/3% of the outstanding principal amount of the 8 1/2% Notes, as well as a substantial portion of the outstanding amount of the 10 3/4% Notes and 10% Notes. The Company expects to launch a formal process to solicit consent for the restructuring from the remaining holders of its debt in the upcoming weeks. Under the terms of the Agreement, the Company intends to implement its financial restructuring through a pre-packaged Chapter 11 filing to be initiated following the conclusion of the solicitation period.
As part of the Agreement, the Company has entered into a forbearance agreement for the $26.5 million semi-annual interest payment due September 1, 2009 on the 8 1/2% Notes. The Company’s operating subsidiaries remain well supported with cash on hand in excess of $170 million as of August 31, 2009. In addition, the Company has excess availability under its asset-based lending facility.
Mr. Bready added, “To date, we have made great progress in these discussions with our debt holders. As this process continues, we remain focused on providing our customers with quality products and on-time deliveries. Throughout this period, it is our intention that trade creditors, suppliers and employees will continue to receive all amounts owed to them in the ordinary course of business. In addition, the Agreement provides that allowed claims of trade creditors, suppliers and employees will be paid in full.”
The Agreement between the Company and its debt holders follows an announcement on June 17, 2009 by the Company that it had retained the Blackstone Group and Weil, Gotshal & Manges to analyze its capital structure. The Company has said it will provide further updates on the process as new information warrants.
NTK Holdings*, the parent company of Nortek Holdings* and Nortek*, is a leading diversified global manufacturer of innovative, branded residential and commercial ventilation, HVAC and home technology convenience and security products. NTK Holdings and Nortek offer a broad array of products including: range hoods, bath fans, indoor air quality systems, medicine cabinets and central vacuums, heating and air conditioning systems, and home technology offerings, including audio, video, access control, security and other products.
*As used herein, the terms “NTK Holdings,” “Nortek Holdings” or “Nortek” refers to NTK Holdings, Inc., together with its subsidiaries, unless the context indicates otherwise. These terms are used for convenience only and are not intended as a precise description of any of the separate corporations, each of which manages its own affairs.