After a year where U.S. wireless capex reached an all-time high, QualTek Services Inc. (NASDAQ: QTEK) filed for bankruptcy under Chapter 11 this week. The move would reduce its debt by approximately $307 million. QualTek expects to emerge from Chapter 11, with its existing lenders and management team as owners.
At the end of 2022, QualTek reported that its revenues did increase by $141.6 million year over year, or 23.1 percent, to $753.8 million compared with $612.2 million in 2021. The increase was primarily driven by an $89.3 million increase in QualTek’s telecom segment supporting 5G and C-band spectrum deployment, and a $25.3 million increase in new installation and underground projects, according to the company’s end of the year report. An additional $50.2 million increase was attributed to a full year ownership of new cable operations.
However, QualTek also suffered losses of more than $100 million in 2022 and 2021. Contributing to the losses, it experienced a $22.5 million drop in its Renewables & Recovery Logistics segment. Additionally, costs increased during the year by $162.6 million, or 32.3 percent, because of higher labor costs and related equipment rental costs. Fuel, travel, and logistics costs also grew, partially because of the inflationary economic environment. Additionally, general and administrative expenses increased by $18.8 million, or 37.1 percent.
The company will be filing a Restructuring Support Agreement (RSA) and Plan of Reorganization, which includes a $65 million debtor-in-possession term loan financing facility, which will include a new money funding of $40 million. “The RSA provides a better roadmap for QualTek to emerge swiftly from Chapter 11 with a strong balance sheet and positioned to invest in growth,” the firm said.
QualTek’s lenders are expected to support the bankruptcy filing, including at least 85 percent of its secured debt holders and approximately 80 percent of its convertible noteholders, according to the company.
“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,” said QualTek CEO Scott Hisey. “With the continued dedication of our employees and partners, we plan to emerge stronger and ready to build for the future.”
QualTek’s troubles have been in the news recently. In March, it missed loan payments and closed on a $55 million loan under its existing term loan credit agreement and appointed Cari Turner of Alvarez & Marsal as Chief Restructuring Officer. QualTek has a national footprint with more than 65 operation centers across the U.S. and a workforce of more than 5,000 people.
By J. Sharpe Smith, Inside Towers Technology Editor