Pathway finds ally in Ares for $ 1.28 billion debt deal


NEW YORK, June 15 (LPC) – Veterinary service provider Pathway Vet Alliance turned to the private debt market to place a $ 255 million second-tier loan that would have made a bigger debt package bigger difficult to sell to investors.

The second-tier loan was placed privately with asset manager Ares Management, according to two sources. This allowed the company to alleviate total debt ahead of a bank meeting for the remaining portion of a $ 1.28 billion debt package, which supports the acquisition of Pathway by private equity firm TSG Consumer. Partners.

The financing also includes a senior loan of US $ 945 million and a revolving credit facility of US $ 80 million, the sources added.

Jefferies is leading the case.

Lenders who took out loans for acquisitions before the coronavirus hit capital markets had no choice but not to syndicate this debt, as cautious investors were reluctant to participate in new investment opportunities. funding. In some cases, companies have turned to more expensive and opaque structures such as second-tier private loans.

Pathway is no stranger to the private credit market, either. In 2016, Morgan Stanley Capital Partners bought the company and quickly expanded it by acquiring several independent veterinary clinics.

Ares first invested in the company in the fourth quarter of 2017, initially in a first lien position, before adding a second lien position in the fourth quarter of 2018, according to data from Refinitiv BDC Collateral.

Over the past four years, several business development companies, including New Mountain Capital, The Carlyle Group and Goldman Sachs, have invested in Pathway debt, according to data from Refinitiv BDC Collateral.

“The demand for private placements is high and the pricing threshold is at a level that can excite (investors),” said a senior banker.

A spokesperson for Ares was not immediately available for comment. Spokesmen for Jefferies and TSG declined to comment.


Private credit investors with generous pockets have demonstrated their ability to engage in large middle market loans that may have been widely syndicated in the past.

Food retailer US Foods, for example, placed a US $ 300 million loan in April with Guggenheim Investments that was initially intended for the largely syndicated market, Refinitiv LPC reported at the time.

In May, web host WebPros privately placed a second-tier loan of US $ 145 million as part of a US $ 745 million debt deal backing its acquisition by investment fund CVC Partners. Earlier last month, billing software provider Conservice offered a US $ 190 million private second-tier loan that supported an investment by private equity firm Advent International.

As private debt fundraising plummets – the first quarter of 2020 generated commitments of $ 14 billion, the worst total for the quarter since 2016 – the global market has $ 169 billion in gunpowder dries to invest in new deals, according to financial research firm Preqin. .

With perhaps the worst of the coronavirus pandemic behind the United States, optimism is growing among private lenders. About 90% said they were interested in financing acquisitions in a recent Proskauer survey in early May, up from 74% at the end of March.

Pathway operates 270 general veterinary practices and 85 other sites under its Thrive brand, the affordable care arm of the company. (Reporting by David Brooke and Aaron Weinman. Editing by Michelle Sierra and Kristen Haunss.)


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