PROVIDENCE, R.I. — NTK Holdings Inc. and Nortek Inc. announced that the company has entered into a restructuring and lockup agreement with a substantial portion of its bond holders to carry out a comprehensive restructuring of the company’s debt. When concluded, the company said, the agreement will eliminate approximately $1.3 billion in total indebtedness, providing financial strength and flexibility to the firm’s balance sheet.

Nortek, a subsidiary of NTK Holdings, is a leading manufacturer of residential and commercial ventilation, HVAC, and home technology convenience and security products.

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 percent Senior Subordinated Notes due 2014 will exchange their debt for substantially all of the equity of the company. Holders of NTK Holdings’ 10-3/4 percent Senior Discount Notes due 2014, Nortek’s 9-7/8 percent 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 percent Senior Secured Notes due 2013 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 percent Notes of $750 million will remain outstanding.

The company said it entered into the agreement with certain holders of, in aggregate, at least 66-2/3 percent of the outstanding principal amount of the 8-1/2 percent Notes, as well as a substantial portion of the outstanding amount of the 10-3/4 percent Notes and 10 percent Notes. The company has also launched a formal process to solicit consent for the restructuring from the remaining holders of its debt. 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.

Bready stated, “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.”

Publication date: 09/21/2009