Kohlberg Kravis Roberts-backed door manufacturer Masonite International missed a $42 million interest payment on $769 million subordinated notes that was due 15 October and is up against the clock to negotiate a waiver on the debt or default.
Standard & Poor’s and Moody’s downgraded Masonite after the company failed to make the payment. The missed interest payment triggered a 30-day grace period for the company to make the payment or obtain a waiver, after which Masonite will be in default and the lenders can call in the full amount of the loan immediately. The grace period expires 15 November.
KKR declined to comment. The New York-based buyout giant acquired Masonite in 2005 for C$3.1 billion. At the time of the buyout, Masonite had made a profit of $107 million in 2003 and $100 million for the first nine months of 2004.
The housing crisis in the US reversed the company’s fortunes, and in September Masonite was forced to negotiate a forbearance agreement with its lenders for breaching covenants related to the company’s financial performance in 2008. The forbearance agreement on the covenants expires on 13 November.
The Ontario-based manufacturer makes doors and door components for customers in more than 70 countries.
KKR, which has filed to go public, has reported a $1.2 billion investment loss for the first six month of the year, compared to a $3.1 billion gain for the same time period in 2007. The firm attributed the loss to decreases in the market value of its investment portfolio and “to a lesser extent a decline in net realized gains”.
The firm said in a regulatory filing last week that it estimates more losses for the third quarter of 2008. KKR also said that it has sold selected limited partner interests with original total commitments of $450 million in the KKR 2006 Fund and KKR Millennium Fund for about $299.5 million.