S&P trims PetVet

S&P said it lowered its ratings for Romulus Intermediate Holdings 2 Inc. (PetVet Care Centers LLC) and its senior secured credit facility to B- from B and its second-lien debt to CCC from CCC+. The recovery ratings are unchanged at 3 and 6, respectively.

“The downgrade reflects our expectation that PetVet will sustain S&P Global Ratings-adjusted leverage of more than 9x and free-operating cash flow (FOCF) to debt of less than 3.5% as its revenue expansion slows and its expenses remain elevated. We expect the company to generate a cash flow deficit in 2022, which is significantly lower than our previous forecast of about $50 million to $60 million, due to rising interest rates, wage inflation, and transaction expenses,” S&P said in a press release.

The agency said it does estimate PetVet will deliver free cash flow of $15 million-$20 million in 2023, which is still well below its previous forecast for $90 million to $100 million.

The outlook is stable.

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