S&P snips Pathway Vet Alliance

S&P said it lowered its ratings on Pathway Vet Alliance LLC (Thrive Pet Healthcare) and its senior secured credit facility to CCC+ from B-. The 3 recovery rating (rounded estimate: 50%) is unchanged.

The downgrade indicates that, despite some margin improvement, Thrive will keep having free cash flow deficits through 2025 and, potentially, 2026, the agency said.

“Due to our expectation for continued compressed margins, we now forecast Thrive will report a free cash flow deficit of $90 million-$100 million in 2023, which will improve to a deficit of $60 million-$80 million in 2024. We expect the company will be able to cut back on its capital expenditure (capex) in 2025 following the end of its previously contracted projects in 2024. This, coupled with our forecast for a slight improvement in its margins, leads us to expect that Thrive will generate a free cash flow deficit of just $10 million-$30 million by 2025,” S&P said in a press release.

The outlook is negative.

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