S&P cuts QualTek

S&P said it downgraded its ratings for QualTek LLC and its senior secured first-lien term loan to CCC+ from B-. The recovery rating remains 3 (rounded estimate: 60%).

“The downgrade reflects a weaker liquidity position following free operating cash outflow. Following the substantial transaction fees related to business combination, QualTek's free operating cash flow (FOCF) remained negative in the second quarter. While negative FOCF has been driven by working capital outflows in line with increased project volumes, the company has also faced cost pressures and supply chain issues,” the agency said in a press release.

S&P noted QualTek’s tight liquidity position with only $25.4 million of revolver availability as of the end of the second quarter.

The outlook is negative.

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