Research Update: Covetrus Inc. Assigned 'B-' Issuer Credit Rating; Stable Outlook; 'B-' Issue-Level Rating; (Recovery Rating: '3')

Portland, Maine-based animal health distributor Covetrus Inc. plans to issue a $300 million first-lien revolving credit facility, a $1.525 billion first-lien term loan, and a $350 million second-lien term loan as part of its acquisition by financial sponsors Clayton, Dubilier&Rice and TPG Capital. We expect adjusted debt to EBITDA in excess of 8x in 2022 and above 7x in 2023, and we think leverage will remain high due to the expected prioritization of growth investments and shareholder returns over debt repayment. Covetrus has a narrow focus primarily on the distribution of animal health products to veterinarians with intense competition from two other large distributors, low switching costs, significant supplier power, and relatively thin margins, despite holding the highest

...- Portland, Maine-based animal health distributor Covetrus Inc. plans to issue a $300 million first-lien revolving credit facility, a $1.525 billion first-lien term loan, and a $350 million second-lien term loan as part of its acquisition by financial sponsors Clayton, Dubilier & Rice and TPG Capital. - We expect adjusted debt to EBITDA in excess of 8x in 2022 and above 7x in 2023, and we think leverage will remain high due to the expected prioritization of growth investments and shareholder returns over debt repayment. - Covetrus has a narrow focus primarily on the distribution of animal health products to veterinarians with intense competition from two other large distributors, low switching costs, significant supplier power, and relatively thin margins, despite holding the highest global market share with a growing end market. - S&P Global Ratings assigned its 'B-' long-term issuer credit rating to Covetrus and its 'B-' issue-level rating and '3' recovery rating to the company's first-lien...

Research Update