Nortek Says Creditors Back Restructuring
By Joseph Palenchar -- TWICE, 10/26/2009
PROVIDENCE, R.I. — Privately held Nortek said its debt holders approved a prepackaged reorganization plan that would swap most of the company's debt for equity.
The company's next step is to file Chapter 11 to get the approval of a bankruptcy court to execute the agreement. Under the restructuring, about $1.3 billion out of a total $2.05 billion in debt will be eliminated, the company said.
Earlier this month, the company secured a commitment for a $250 million asset-based revolving line of credit as part of its prepackaged reorganization plan.
Company officials have not yet returned calls to explain whether existing management will remain intact, when Chapter 11 will be filed, or whether the company's current owners — management and Thomas H. Lee Partners — will own a majority of the company after the debt restructuring.
Nortek owns multiple companies that sell products for commercial and residential installation. In home technology, the company's brands include many of the major powers in the residential custom-install industry, such as Aton, Channel Plus, Elan, Gefen, Imerge, M&S, Niles, Omnimount, Panamax, SpeakerCraft, Sunfire and Xantech. The company also owns residential HVAC and ventilation companies and commercial HVAC suppliers.
Calendar 2008 financials show pretax losses before income taxes of $819 million, compared with 2007 earnings of $3.6 million and 2006 earnings of $104 million. In 2008, the company's net loss was $844.5 million, compared with a 2007 net loss of only $7 million.
Also in 2008, the company posted an operating loss of $574 million, compared with an operating profit of $210 million, as company-wide net sales fell 4.2 percent to $2.37 billion, compared with a 2007 gain of 6.8 percent. At the same time, interest expenses rose to $200 million from $184 million.
First-half financial results in 2009 show net sales fell 22 percent to $927 million; operating losses hit $201 million, compared with year-ago earnings of $70 million; interest expenses rose to $76 million from $59 million; and net losses hit $278 million, compared with a net loss of $400,000. The results followed cost-reduction measures that saved the company an estimated $39.5 million in the first half.
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