Nortek expects non-compliance with ratios, plans use of equity cure right to regain compliance

By Sara Rosenberg

New York, May 12 - Nortek Inc. expects that it will be unable to comply with the interest coverage ratio and leverage ratio under its credit facility at the end of the second quarter, and anticipates using an equity cure right to remedy the situation, according to a 10-Q filed with the Securities and Exchange Commission Monday.

Under the credit agreement's cure right, a subsequent cash equity investment equal to the EBITDA shortfall will be treated as EBITDA for purposes of the compliance calculations in the current and future periods. The senior secured credit facility allows for such a cure to occur twice within a consecutive 12-month period.

The company already used this cure in the first quarter because its EBITDA was below the level necessary to be in compliance with the interest coverage and leverage ratios by about $4.2 million.

Nortek is a Providence, R.I.-based manufacturer and distributor of building products for residential, light commercial and commercial applications.

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