S&P rates Nortek notes, loan

Standard & Poor's said it affirmed the B+ corporate credit ratings of Nortek Holdings Inc. and its Nortek Inc. subsidiary and removed the ratings from CreditWatch. The outlook is negative.

S&P also assigned its B+ bank loan rating and its recovery rating of 3 to Nortek Inc.'s $100 million revolving credit facility due 2010 and $700 million amortizing term loan due 2011. A B- rating was also assigned to a planned offering of $625 million of senior subordinated notes due 2014.

S&P said the affirmation anticipates that the substantially increased debt load as a result of the sale of Nortek Holdings to Thomas H. Lee Partners LP.

"Leverage measures are stretched for the current ratings and contain little flexibility for any slowdown in debt reduction during the next several years," said S&P credit analyst Wesley E. Chinn.

Proceeds from the term loan and subordinated notes issuance and cash on hand will be used to help finance the acquisition consideration and redemption of all existing rated debt issues. Following the acquisition of Nortek Holdings by THL, Nortek Holdings will be merged into Nortek Inc., which will become the borrower under the secured credit facilities and senior subordinated notes.

S&P said the ratings reflect the consolidated entity's competitive, cyclical markets, the niche characteristic of certain products, and poor leverage measures due to the very aggressive use of debt. This is partially mitigated by a somewhat diversified portfolio of building products with significant market shares, relatively stable cash flows, and a manageable debt maturity schedule.

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