U.S.-based veterinary practice management company Pathway Vet Alliance LLC (doing business as Thrive Pet Healthcare) continues to face cash flow deficits due to persistent operating challenges, soft industrywide volumes, and high interest rates. While we believe the company is making progress toward addressing these issues, we anticipate it will generate material free cash flow deficits in 2023 and 2024 (likely also through 2025 and, possibly, 2026). We now believe Thrive's capital structure is likely unsustainable and see an elevated possibility of default (including a distressed exchange) in the next 2-3 years. Therefore, we lowered our long-term issuer credit rating on the company to 'CCC+' from 'B-' and our issue-level rating on its senior secured credit facility to 'CCC+' from 'B-'.
