Research Update: Covetrus Inc. 'B-' Rating Affirmed; Outlook Remains Stable

Portland, Maine-based animal health distributor Covetrus Inc. continues to pursue working capital and cost management initiatives to improve margins and cash flow from operations to offset the impact of benchmark rate increases on its debt service costs. We believe the company has sufficient liquidity to manage working capital swings and modest cash burn over the next 12 months as it continues to grow its revenue and margins. Therefore, we affirmed our 'B-' issuer credit rating. The 'B-' issue-level rating and '3' recovery rating on the company's first-lien credit facility remain unchanged. The stable outlook reflects our expectation that despite a projected cash flow deficit in 2023, Covetrus will continue to grow revenue in the low- to mid-single-digit percent range over

...- Portland, Maine-based animal health distributor Covetrus Inc. continues to pursue working capital and cost management initiatives to improve margins and cash flow from operations to offset the impact of benchmark rate increases on its debt service costs. - We believe the company has sufficient liquidity to manage working capital swings and modest cash burn over the next 12 months as it continues to grow its revenue and margins. - Therefore, we affirmed our 'B-' issuer credit rating. The 'B-' issue-level rating and '3' recovery rating on the company's first-lien credit facility remain unchanged. - The stable outlook reflects our expectation that despite a projected cash flow deficit in 2023, Covetrus will continue to grow revenue in the low- to mid-single-digit percent range over the next 12 months and expand S&P Global Ratings-adjusted EBITDA margins to about 5.0% as it implements cost cutting measures and restructuring costs taper off. It also reflects our expectation that temporarily...

Research Update