Moody's downgrades QualTek

Moody's Investors Service said it downgraded QualTek LLC's corporate family rating to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD, and its senior secured first-lien term loan B to Caa1 from B3. The agency also assigned an SGL-4 speculative grade liquidity rating to QualTek given that it's now a public company.

"The rating downgrade reflects QualTek's tight liquidity, weak earnings and high debt leverage, despite the company's large order backlog and pricing actions. In particular, the inflationary environment and limited available liquidity at the end of Q3 2022 could impact its ability to execute and complete many projects as planned, which in turn dims the prospect of a swift improvement in earnings. The likelihood of a financial restructuring is increasing with rising interest expenses given its high debt leverage and lack of free cash flow," said Jiming Zou, a Moody's vice president and lead analyst on QualTek, in a press release.

The outlook remains negative.

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