Thrive Pet Healthcare brings in financial advisor as cash deficits persist

Thrive Pet Healthcare has hired Evercore as financial advisor as the veterinary practice management company is grappling with persistent cash deficits and challenges retaining vets, according to three sources familiar with the matter.

The TSG Consumer Partners-backed company’s liquidity position deteriorated over the past year as business conditions worsened. The issuer is expected to burn around USD 80m to USD 90m of cash through 2024, according to an S&P Global Ratings report in April.

S&P downgraded the company to CCC+ in April on negative cash flow and high leverage, noting that the issuer’s capital structure is “likely unsustainable” and that its cash deficit is likely to continue through 2025 and potentially to 2026. The ratings agency warned that Thrive has faced issues bringing on and retaining vets, leading to lower volumes.

Given concerns around performance and its liquidity crunch, a group of term loan lenders hired law firm Akin Gump in May, said two of the sources.

Thrive operates over 530 primary, specialty and acute veterinary providers, according to its website. The company acquired several providers in recent years but has since moved to close some of its facilities, including a hospital in upstate New York and a location in California. Thrive shut the NY facility due to what it said was a lack of “ER doctors.”

TSG acquired the company at the start of the COVID-19 pandemic in early 2020 at an elevated valuation of 21x EBITDA, said an additional source familiar with the matter and a sector advisor.

Thrive at the time was known as Pathway Vet Alliance. Mergermarket reported ahead of the deal that Pathway was being marketed on USD 159m of EBITDA with financing available at up to 8x EBITDA.

“I can’t see them selling anytime soon. No one would buy them, and TSG has way too much equity to let it go under,” said the sector advisor. “They need to fix their problems first.”

Thrive has had three CEOs in the past five years, and since June 2023 hired a new CFO and a new COO, according to company press releases.

The company’s USD 1.55bn S+375bps term loan due March 2027 was last quoted 78.375/79.75 on Tuesday, and its USD 80m revolver was quoted at 74.288/75.663, according to MarketAxess.

TSG declined to comment. Evercore, Thrive Pet Healthcare and Akin did not reply to request for comments.