Research Update: Pathway Vet Alliance LLC 'B-' Rating Affirmed On Operational Performance Initiatives; Outlook Remains Negative

U.S.-based veterinary practice management company Pathway Vet Alliance LLC (doing business as Thrive Pet Healthcare) continues to experience negative free cash flows given compressed margins due to labor costs and underutilization of capacity. We believe the company is making progress in addressing these operational issues, which will benefit margins over the forecast period and there has been some early success surrounding profitability initiatives. Despite this progress, we still expect the company to continue to generate negative free cash flows in 2023 and 2024. We have affirmed our 'B-' issuer credit rating and are maintaining our negative outlook. We also affirmed our 'B-' issue-level rating on the senior secured credit facility. The recovery rating remains '3'. The negative outlook reflects the

...- U.S.-based veterinary practice management company Pathway Vet Alliance LLC (doing business as Thrive Pet Healthcare) continues to experience negative free cash flows given compressed margins due to labor costs and underutilization of capacity. - We believe the company is making progress in addressing these operational issues, which will benefit margins over the forecast period and there has been some early success surrounding profitability initiatives. Despite this progress, we still expect the company to continue to generate negative free cash flows in 2023 and 2024. - We have affirmed our 'B-' issuer credit rating and are maintaining our negative outlook. - We also affirmed our 'B-' issue-level rating on the senior secured credit facility. The recovery rating remains '3'. - The negative outlook reflects the risk the company would be unable to improve its EBITDA margins to the mid- to high-teens level and sustainably generate free cash flows and manage its high debt load during the outlook...

Research Update