Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
On April 18, 2023, QualTek Services Inc., a Delaware corporation (the
"Company"), received a notice (the "Notice") from The Nasdaq Stock Market LLC
("Nasdaq") stating that because the Company has not yet filed its Form 10-K (the
"Form 10-K"), the Company is no longer in compliance with Nasdaq Listing Rule
5250(c)(1), which requires listed companies to timely file all required periodic
financial reports with the Securities and Exchange Commission (the "SEC").
This notification has no immediate effect on the listing of the Company's shares
on Nasdaq. However, if the Company fails to timely regain compliance with the
Nasdaq Listing Rule, the Company's common stock will be subject to delisting
from Nasdaq. Under Nasdaq rules, the Company has 60 calendar days to submit to
Nasdaq a plan to regain compliance with the Nasdaq Listing Rule. If Nasdaq
accepts the Company's plan, then Nasdaq may grant the Company up to 180 days
from the prescribed due date for filing the Form 10-K to regain compliance. If
Nasdaq does not accept the Company's plan, then the Company will have the
opportunity to appeal that decision to a Nasdaq Hearings Panel.
Item 7.01 Regulation FD Disclosure.
On April 24, 2023, the Company issued a press release disclosing its receipt of
the Notice referenced above and the matters discussed below relating to the
Company's indebtedness. A copy of the press release is attached as Exhibit 99.1
to this Current Report on Form 8-K and is incorporated herein by reference.
This information is furnished pursuant to Item 7.01 of Form 8-K and shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that Section, unless we
specifically incorporate it by reference in a document filed under
the Securities Act of 1933 or the Securities Exchange Act of 1934. By furnishing
this information on this Current Report on Form 8-K, we make no admission as to
the materiality of any information in this report that is required to be
disclosed solely by reason of Regulation FD.
Item 8.01. Other Events.
As previously disclosed, on March 15, 2023, the Company did not make an interest
payment of approximately $3.7 million due on its Senior Unsecured Convertible
Notes due 2027 (the "Convertible Notes"). The Company had a 30-day grace period,
or until April 14, 2023, to make the interest payment. The Company has not made
the interest payment, and, as a result, an event of default has occurred under
the indenture that governs the Convertible Notes (the "Indenture"), the ABL
Credit Agreement (as defined below) and the Term Loan Credit Agreement (as
defined below). Pursuant to the Indenture, upon an event of default, the trustee
under the Convertible Notes or holders of 25% in aggregate principal amount of
the outstanding Convertible Notes may declare the principal of, premium, if any,
on and accrued and unpaid interest on, the Convertible Notes to be due and
payable immediately, which would require the Company to pay approximately $130
million immediately. In addition, pursuant to each of the ABL Credit Agreement
and the Term Loan Credit Agreement, upon an event of default, the lenders under
such facilities can accelerate the repayment of the outstanding borrowings
thereunder and exercise other rights and remedies that they have under
applicable laws. The Company has not received any notices of acceleration as of
the date hereof.
The Company has entered into a forbearance agreement with holders of
approximately 72% of the aggregate principal amount of the outstanding
Convertible Notes (the "Forbearing Holders"), pursuant to which the Forbearing
Holders have agreed to (i) forbear from exercising any of their rights and
remedies, including with respect to an acceleration, under the Indenture or
applicable law with respect to any default or any event of default arising under
the Indenture relating to or as a proximate result of the Company's failure to
pay interest on the Convertible Notes on March 15, 2023 or during the subsequent
30-day grace period and (ii) exercise their rights pursuant the Indenture to
direct the trustee to forbear from exercising any remedy available to the
trustee or exercising any trust or power conferred upon the trustee with respect
to such defaults or events of default, in each case during the period commencing
on April 24, 2023 and ending upon the earliest to occur of (a) 11:59 p.m. (New
York City time) on May 15, 2023, (b) the occurrence of any event of default
other than the defaults and events of default specified above, (c) payment of
interest that was due March 15, 2023 to each Forbearing Holder, (d) the
Company's failure to pay any amounts owed to certain of the Forbearing Holders'
advisors, (e) an event of default, acceleration, or similar event in connection
with any of the Company's funded and/or revolving indebtedness, provided that
the Company has not entered into a forbearance or similar agreement with respect
to the foregoing clause (e), and (f) any borrowing or further extension of
credit under the Company's term loan facility, any provision of additional
collateral to or for the benefit of the lenders under such term loan facility or
any other lenders, agents, trustees or other parties under any credit facility
or any other financing or similar instrument, or entry into any other
non-ordinary course financing or similar transaction or any material asset
disposition, in each case without the express written consent of the Forbearing
Holders.
The Company has entered into a forbearance agreement with the administrative
agent and lenders (the "ABL Forbearing Holders") under the ABL Credit Agreement,
dated as of July 18, 2018 (as amended, supplemented or otherwise modified from
time to time, the "ABL Credit Agreement"), pursuant to which the ABL Forbearing
Holders have agreed to forbear from exercising any of their rights and remedies,
including with respect to an acceleration, in respect of a cross-payment event
of default arising under Section 8.1(b)(i) of the ABL Credit Agreement, among
other changes and forbearances, including a reduction in the aggregate
commitment from $105 million to $90 million. The forbearance period shall expire
on the earliest of: (i) May 15, 2023, (ii) the time at which any of the
representations and warranties in the forbearance agreement is inaccurate in any
material respect or any covenant is breached in any material respect, (iii) the
occurrence of any other default or event of default under the ABL Credit
Agreement or (iv) the trustee under the Convertible Notes exercises any remedy
under the Indenture.
The Company has entered into a limited waiver agreement with the administrative
agent and required lenders (the "Term Loan Waiving Holders") under the Term Loan
Credit Agreement, dated as of July 18, 2018 (as amended, supplemented or
otherwise modified from time to time, the "Term Loan Credit Agreement"),
pursuant to which the Term Loan Waiving Holders have agreed to waive certain
defaults, including with respect to an acceleration, due to a cross-payment
event of default under Section 8.1(b)(i) of the Term Loan Credit Agreement,
among other changes and waivers that will allow the Company to request
additional borrowings in the form of new money incremental term loans in an
amount of up to $20 million, subject to the approval of the Required Lenders (as
defined in the Term Loan Credit Agreement). The waiver period shall expire on
the earliest of: (i) May 15, 2023, (ii) the time at which any of the
representations and warranties in the limited waiver agreement is inaccurate in
any material respect or any covenant is breached in any material respect, (iii)
the occurrence of any other default or event of default under the Term Loan
Credit Agreement or (iv) the trustee under the Convertible Notes exercises any
remedy under the Indenture.
We will likely choose or need to obtain alternative sources of capital,
otherwise meet our liquidity needs and/or restructure our existing indebtedness
through the protections available under applicable bankruptcy or insolvency
laws, including Chapter 11 of the U.S. Bankruptcy Code. Holders of our Class A
Common Stock will likely not receive any value or payments in a restructuring or
similar transaction.Our normal operations are not anticipated to be impacted and
we expect to continue to serve our customers with our dedicated and experienced
team members.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
EXHIBIT
NO. DESCRIPTION LOCATION
99.1 Press Release Furnished herewith
104 Cover Page Interactive Data File
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