Nortek unfazed by bankruptcy filing; Starwood holds on despite poor numbers; NXP notes soften

By Stephanie N. Rotondo

Portland, Ore., Oct. 22 - In notable news in the distressed debt market, Nortek Inc. and its domestic subsidiaries filed for bankruptcy Thursday.

But the news was largely expected - Nortek had solicited votes on a prepackaged plan previously - and traders saw the bonds holding steady during trading.

Meanwhile, Starwood Hotels & Resorts Worldwide Inc. reported its third-quarter results, which one trader called "crappy." But while the bonds traded somewhat actively, they ended mostly unchanged on the day.

A trader said the technology sector was mixed throughout Thursday, but NXP BV's bonds were among the day's losers. However, another trader deemed the debt unchanged to possibly even better.

Nortek unfazed by bankruptcy filing

Providence, R.I.-based Nortek and its U.S. subsidiaries filed for bankruptcy Thursday, but the news did little to move its bonds.

A trader called the 8½% notes due 2014 unchanged around 69. He also saw the 10¾% notes due 2014 around 3 3/8, which he deemed to be "up marginally from last week."

Another trader quoted the issue at 68 bid, 69 offered, also unchanged.

The second trader noted that there was "not much trading" in the credit.

The lack of any real movement in the notes was likely due to the fact that Nortek had already solicited votes on a prepackaged bankruptcy filing.

Under the terms of the plan, holders of the 10% notes due 2013 will receive new 11% senior secured notes and 5% of the new equity in the reorganized company. Holders of the 8½% notes, as well as the 9 7/8% notes due 2011 will receive 93% of the new equity and the 10¾% noteholders will receive the remaining 2% equity.

The plan is expected to reduce overall debt by about $1.3 billion.

"We continue to believe that Nortek has fundamentally sound businesses operating in established markets that are poised for growth as economic conditions improve," said Richard L. Bready, chairman and chief executive officer, in the release.

"The chapter 11 process will enable Nortek to emerge as an even stronger company with substantially less debt. Going forward, we anticipate no disruption in product availability or delivery of products and remain focused on meeting customer needs worldwide."

Nortek expects that cash on hand and from operating activities will be sufficient to cover its costs during its reorganization process and is not seeking debtor-in-possession financing. As of the date of the filing, Nortek had in excess of $125 million cash on hand and a commitment for a $250 million asset-backed revolving credit facility that will be available once the company exits bankruptcy.

The company expects the reorganization plan will be formalized within two to three months.

On the news of the filing, Moody's Investors Service dropped its rating on the company to D.

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

Starwood holds steady

Despite what one trader called "crappy numbers," Starwood Hotels & Resorts Worldwide saw its bonds holding their ground.

The trader called the notes "basically unchanged," the 7 7/8% notes due 2012 at 104.25 bid, 104.75 offered. The 6¼% notes due 2013 ended at 99.25 bid, 100.25 offered and the 6¾% notes due 2018 at 95.75 bid, 96.75 offered.

"Their stock was off 57 cents, so that tells you the numbers were not good," he said.

But another trader called the 7 7/8% notes "up like everything else" at "104 and change." He said the notes had been "grinding higher" since last week, when they were trading around 102 bid, 103 offered.

For the third quarter, the owner of Sheraton, W and other branded hotels posted a 64% decline in profit. Net income came to $41 million, or 22 cents per share, compared to $113 million, or 62 cents per share, for the same quarter of 2008.

A market source said that expectations had been at 25 cents per share, "so they are way under."

Total revenues declined 32% to $1.22 billion, while revenue per available room - or revpar - fell 20.3% worldwide. In the United States, revpar dipped under 20%, though outside the United States, revpar declined by 21%.

"Over the past 12 months we have focused on cost containment and debt reduction, which positions us well to 'Own the Upswing,'" commented Frits van Paasschen, CEO, in an earnings release.

"Our increasingly fee-based, capital-efficient business model will grow as REVPAR recovers and as our pipeline translates into unit additions. Our owned hotels are skewed towards the high end and have been particularly hard-hit over the past twelve months, implying they are poised for a strong rebound as the world economy recovers. And with half of our hotels outside of the United States, we will benefit from secular growth in international markets.

"With the $6 billion Sheraton Revitalization Program nearly complete, I can't think of a better time to aggressively re-launch the brand than into the early stages of an upcycle," he concluded.

Starwood is a White Plains, N.Y.-based operator of hotels.

NXP notes soften

A trader said it was a "mixed bag" within the technology space and there was definite weakness in NXP.

He saw the 9½% notes due 2015 falling about 1.5 points from the day before to levels in the 77 area.

But another trader deemed the issue unchanged, also around 77. The second trader also saw the 7 7/8% notes due 2014 at 85 bid, 86 offered, which he called "unchanged from yesterday, maybe up slightly form the beginning of the week."

NXP is an Eindhoven, The Netherlands-based semiconductor manufacturer.

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