KKR to Swap Junk Bonds Of Jim Walter
NEW YORK -- Kohlberg Kravis Roberts & Co. sought to restructure $624 million of debt at its Jim Walter Corp. unit to head off potential troubles stemming from turmoil in the junk bond market and from asbestos-related lawuits.</br></br>Hillsborough Holdings Corp., a company that KKR set up when it bought Jim Walter in a $3.3 billion leveraged buy-out in January 1988, began an exchange offer for $624 million of junk bonds whose interest rate is scheduled to be reset by Dec. 2.</br></br>Hillsborough is offering to pay bondholders about $3 million in cash and increase the interest rates paid on the bonds by about a percentage point, in order to avoid a reset procedure that might result in interest rates above 20% because of the current slump in the junk bond market. The Hillsborough bonds now have interest rates ranging from 14.5% to 16.625%.</br></br>In addition, officials of Hillsborough said the company is seeking to extend the repayment terms of some of its $257 million of bank debt, of which about $200 million is currently scheduled to be repaid in 1991. In exchange for a longer repayment schedule, Hillsborough would agree to pay off some bank debt early with some of the proceeds from an expected financing of the company's coal mines.</br></br>The potential troubles at Jim Walter follows several months of debt restructuring at Seaman Furniture Co., a much smaller company that KKR also bought last year. In addition, the difficulties with the Hillsborough reset bonds could presage similar troubles next year with reset securities issued in its acquisition of RJR Nabisco Inc., if the junk bond market doesn't recover.