Telecom servicer QualTek enters bankruptcy to cut $307 mln debt

QualTek Services

24/05/2023 21:38

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      Company says more than 80% of lenders support a debt
restructuring
    

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      Rising interest rates pushed QualTek to bankruptcy
    

  
    By Dietrich Knauth
       (Reuters) - Telecommunications and power contractor
QualTek Services Inc  QTEK.O  filed for bankruptcy on Wednesday,
armed with a restructuring deal that could slash $307 million of
the company's $625 million debt.
    QualTek filed for Chapter 11 protection in Houston, saying
that increasing debt costs were beginning to cut into its
operating budget, at a time when inflation was already causing
it to pay more for labor and energy. 
    Rate hikes caused QualTek's 2022 interest expense to balloon
by 33% to $59.3 million, according to its court filings.
    QualTek went public through a special purposes acquisition
vehicle (SPAC) deal in February 2022, just before the Federal
Reserve began raising interest rates in an effort to curb
inflation in the U.S. economy. QualTek's public offering raised
"far less" equity investment than the company anticipated,
requiring it to take on additional interest-bearing debt,
according to court filings.
    QualTek enters bankruptcy with a restructuring agreement
that is supported by 80% of its lenders, who are collectively
owed $625 million. The restructuring deal would reduce the
company's overall debt by $307 million and provide $40 million
of new loans that will fund the company's post-bankruptcy
operations. 
    "We are entering this process with the overwhelming support
of our lenders and customers, which we expect will enable us to
move through this process quickly and without disruption,"
QualTek CEO Scott Hisey said in a statement.
    QualTek hopes to emerge from bankruptcy within 65 days, and
it plans to pay vendors in its supply chain and other junior
creditors in full. 
    The Blue Bell, Pennsylvania-headquartered company has 1,800
employees, and it provides a range of telecom and power
infrastructure services throughout the United States. The
company had $753.1 million in revenue for 2022, more than half
of which came from providing infrastructure support to wireless
phone companies like AT&T, Verizon, T-Mobile, and Comcast,
according to court documents. 
    The case is QualTek Services Inc, U.S. Bankruptcy Court for
Southern District of Texas, No. 23-90584.
    For QualTek: Joshua Sussberg, Christopher Greco and Jaimie
Fedell of Kirkland & Ellis; and Matthew Cavenaugh of Jackson
Walker 
        
    Read more:
    Overstretched U.S. companies feel pinch of higher borrowing
costs 
    Special Report: How Wall Street banks made a killing on SPAC
craze
  

 (Reporting by Dietrich Knauth)