NXP bonds rally after company swings to profit

NEW YORK, July 24 (Reuters) - Bonds issued by Dutch chipmaker NXP BV NXP.BV rallied on Friday after the company said it swung to a second-quarter profit and shrugged off a ratings downgrade.

The Amsterdam-based company's 7.875 percent bonds due in 2014 firmed over 10 cents on the dollar to 60.25 cents, while its 9.5 percent bonds due in 2015 gained 3 cents to trade at 43 cents, according to high yield bond research firm, KDP Investment Advisors in Montpellier, Vermont.

NXP said its second-quarter profit was due to gains from a debt exchange and said it is making good progress towards being able to support a debt load that will come due in a few years.

Struggling with the industry-wide downturn, NXP said it reduced debt in the second quarter by $517 million in a bond exchange offer, while debt was further reduced early in the third-quarter by $744 million in various other transactions. For details, double-click on [ID:nLO727814].

Standard & Poor's downgraded the company two notches to D, or default, as it views NXP's bond exchange as a distressed debt exchange. S&P considers distressed debt exchanges as technical defaults, or credit events.

S&P reduced its rating earlier this week on NXP's secured and unsecured notes to CC, or 10 notches into junk territory, with a negative outlook, saying NXP's capital structure and financial risk profile is still "highly leveraged."

The negative outlook has been removed. [ID:nWNA9656]

NXP was spun off from Amsterdam-based Philips Electronics (PHG.AS) in 2006 in a leveraged buyout, or LBO, to a private equity consortium led by KKR [KKR.UL]. Philips still has a stake in NXP of about 20 percent.

The 2006 LBO was financed mainly through a multi-currency bond deal that totaled around $5.7 billion, or 4.5 billion euros and a roughly 500 million euro revolving credit facility. (Reporting by Tom Ryan additional reporting by Aaron Gray-Block in Amsterdam; editing by Andre Grenon)