QualTek Services Inc. – Leading Infrastructure Services Provider, Controlled by Brightstar Capital, Files for Bankruptcy with @$800mn of Liabilities; Plan Backed by 80% of Noteholders Would Slice Debt by $307mn; Lines Up $40mn of New Money DIP Financing

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May 24, 2023 – QualTek Services Inc. and 17 affiliated debtors (NASDAQ: QTEK; together “QualTek*” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case No. 23-90584 (Judge Christopher M. Lopez). The Blue Bell, PA- based Debtors, "a leading infrastructure services provider," are represented by Genevieve M. Graham of Jackson Walker LLP. Further Board authorized appointments include: (i) Kirkland & Ellis LLP as general bankruptcy counsel, (ii) Alvarez & Marsal as financial advisors, (iii) Jefferies LLC s investment bankers and (iv) Epiq Corporate Restructuring, LLC as claims agent.

* The Debtors are 59.1% owned by Brightstar Capital, with Brightstar Capital's CEO Andrew Weinberg serving as the Chairman of the Debtors' Board. Brighstar Capital acquired the Debtors in August 2021 and took them public in 2022 with announcing press release here.

The Debtors’ lead petition notes between 25,000 and 50,000 creditors; estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn (as at December 31, 2023 [the Debtors failed to file their Q1 2023 10-Q on time], the Debtors had assets of $688.9mn and liabilities of $789.6mn). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Wilmington Trust National Association ($127.4mn notes claim), (ii) TRA Holder Representative BCP Qualtek (ie Brightstar Capital)($15.1mn tax receivable agreement claim) and (iii) Network Wireless Solutions, LLC ($2.7mn trade claim).

In a press release announcing the filing, the QualTek: “announced a restructuring transaction that will position it to achieve long-term success in the telecom, renewables, and recovery logistics sectors. The restructuring transaction reduces the Company’s debt by approximately $307 million and provides $40 million of additional liquidity, substantially improving the Company’s balance sheet and financial position.

QualTek expects significant support of its lenders through this process, including at least 85% of the Company’s secured debt holders and approximately 80% of its convertible noteholders. The Company will be filing a Restructuring Support Agreement ('RSA') and Plan of Reorganization ('Plan'), which contemplates that, upon emergence from Chapter 11, there will be new ownership comprised of the Company’s existing lenders and management team."

DIP Financing

The press release adds: "Under the terms of the RSA, the Company contemplates a $65 million debtor-in-possession term loan financing facility ('DIP Facility'), which will include a new money funding of $40 million. Upon approval by the Court, the DIP Facility will provide the Company with the stability and liquidity needed to continue operations in the ordinary course of business and pay vendors during the reorganization. Management continues to lead the business, roles and responsibilities across the team remain the same, and operations across the Company are expected to continue as usual. “

About the Debtors

According to the Debtors: “Founded in 2012, QualTek is a leading technology-driven provider of infrastructure services to the 5G wireless, telecom, power grid modernization and renewable energy sectors across North America. QualTek has a national footprint with more than 65 operation centers across the U.S. and a workforce of over 5,000 people. QualTek has established a nationwide operating network to enable quick responses to customer demands as well as proprietary technology infrastructure for advanced reporting and invoicing. The Company reports within two operating segments: Telecommunications, and Renewables and Recovery and has already become a leader in providing disaster recovery logistics and services for electric utilities.“

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