Moody’s cuts QualTek, rates loans B3, Caa2

Moody's Investors Service said it downgraded QualTek LLC's corporate family rating to Caa3 from Caa1, its probability of default rating to Caa3-PD/LD from Caa1-PD, and its remainder senior secured first-lien term loan B to Ca from Caa1.

At the same time, Moody's assigned B3 to the new $75 million incremental term loan (including a $55 million senior secured term loan and $20 million senior secured delayed-draw portion) and Caa2 to the $100 million senior secured rollover term loan.

Both the incremental and rollover term loans were newly established by the amended credit agreements as of March 16.

The outlook remains negative. The SGL-4 speculative grade liquidity rating is unchanged.

“The rating downgrade reflects the high likelihood of a financial restructuring or default, given QualTek's weak earnings, high debt leverage, delayed filing of its 10-K as well as its ongoing negotiation with lenders regarding its capital structure,” Jiming Zou, Moody's vice president and lead analyst, said in a news release.

“While the $75 million incremental term loan will support short-term liquidity, the company's pursuit of recapitalization will compromise the promised payments to lenders.”

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