Moody's affirms NTK, Nortek

Moody's Investors Service said it affirmed the ratings of NTK Holdings, Inc. and Nortek, Inc., including NTK's B2 corporate family and probability-of-default ratings and Caa1 $403 million senior discount notes due 2014 (LGD6, 91%) and Nortek's Ba2 $200 million senior secured revolving credit facility due 2011 (LGD2, 18%), Ba2 $691.25 million senior secured term loan due 2011 (LGD2, 18%) and B3 $625 million 8½% senior subordinated notes due 2014 (LGD4, 68%).

The outlook remains negative.

The agency said the ratings reflect the company's expected operating performance in a difficult market, low concentration of business related to new home construction and product diversification. The company plans to hold an initial public offering, the proceeds of which are earmarked for debt reduction. Moody's anticipates that the improvement in the company's balance sheet would significantly strengthen the company's position in the B2 ratings category.

The negative rating outlook reflects uncertainty surrounding the execution of the company's IPO. Moody's said that if the IPO was concluded successfully and debt is paid down, the negative outlook would likely be changed to stable or potentially positive based on the company's operating outlook at the time. The negative outlook also reflects a history of aggressive balance sheet management and the agency's view that the company's leverage reduces its financial flexibility during a potentially significant industry downturn.

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