QualTek dowsized, price trimmed; Investor sees migration toward quality

By Paul A. Harris

Portland, Ore., Oct. 1 – In Tuesday's leveraged loan market, QualTek USA LLC downsized its fungible add-on senior secured covenant-lite term loan B due July 18, 2025 (B3/B) to $100 million from $150 million, while at the same time Brightstar Capital Partners will contribute $25 million in the form of preferred equity.

A pricing update confirmed previous spread talk at Libor plus 625 basis points atop a 1% Libor floor.

Discount talk set the reoffer price at 98, the cheap end of the 98 to 99 price talk.

QualTek inhabits the mid-single B credit sector that has generally been an underperformer since the market regained its feet following the selloff during the fourth quarter of 2018, a portfolio manager said on Tuesday.

In a loan market that has posted 6.79% overall returns in 2019 to date, double B loans have returned 7.82%, 103 bps greater than the composite, the investor said, citing the S&P loan index.

Single B loans, meanwhile, have returned 6.73%, just six bps below the composite but 109 bps below double B loans.

Triple C loan paper has returned just 1.99% year to date, the investor said.

There is some understandable risk aversion at play in these numbers, the source said.

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