QualTek receives confirmation of Chapter 11 plan of reorganization

By Sarah Lizee

Olympia, Wash., June 30 – QualTek Services Inc.’s pre-packaged Chapter 11 plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas, according to an order filed Friday.

As previously reported, the plan aims to reduce the debtors’ prepetition debt by roughly $307 million, deleverage their balance sheet, and provide additional liquidity.

The plan has the support of 100% of secured debtholders and 100% of voting convertible noteholders.

At emergence, the company will have a $25 million exit term loan, in addition to the $40 million previously funded debtor-in-possession financing, and an asset-based lending facility with $101.2 million in availability to ensure that it is well capitalized in the future.

Term loans will bear interest SOFR plus 800 basis points for the cash option. For the cash/payment-in-kind option, interest is SOFR plus 1,000 bps, with 100 bps payable in cash and 900 bps payable in kind.

Interest on the ABL will be the Bloomberg Short-Term Bank Yield index rate plus 500 bps, increased by 25 bps per fiscal quarter.

The ABL facility will mature in one year. The term loan facility is set to mature in two years, subject to potential extension.

Under the plan, holders of administrative claims and other priority claims will receive payment in full in cash.

Holders of allowed priority term loan claims will have their priority term loan claim converted on a dollar-for-dollar basis into a first-lien exit facility loan.

Holders of allowed rollover term loan claims will receive their pro rata share of the third-lien exit facility loans.

Holders of allowed tranche B term loan claims will receive their pro rata share of 40% of new equity interests, subject to dilution by warrants and a management incentive plan (MIP).

Holders of allowed convertible notes claims will receive their pro rata share of 10% of new equity interests, subject to dilution by the warrants and the MIP, and their pro rata share of warrants.

General unsecured claims will be reinstated or otherwise receive payment in full in cash.

QualTek is a Blue Bell, Pa.-based provider of turnkey services to the North American telecommunications, infrastructure and power industries. The company filed bankruptcy on May 24 under Chapter 11 case number 23-90584.

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