Gordian Group acted as investment banker to the Company, including running a market-test for DIP financing and effecting a successful sale in bankruptcy that saw all creditors paid in full and distributions paid to equity holders, all in the face of the COVID crisis.
CLIENT: VitalPet, Inc.
Veterinary Care Inc. dba VitalPet, was an operator of 24 veterinary hospital practices in seven states, primarily in Texas and New York.
While historically profitable, VitalPet made several acquisitions in 2017 and 2018 (funded by debt) that dragged down operating performance to the point that corporate EBITDA was breakeven, cash flow was negative and VitalPet was in default of its credit agreement. Eventually, the relationship between VitalPet’s founder/CEO and senior lender (also an equity investor) deteriorated and the lender attempted to remove the CEO and appoint a new management team. While the CEO regained control of VitalPet through an injunction, an involuntary chapter 11 petition was filed against VitalPet in October 2019.
In November, the Debtors consented and filed a voluntary petition. Doug Brickley of the Claro Group was appointed CRO to guide the business through the bankruptcy process and Okin Adams was retained as counsel by the Debtors.
Gordian was subsequently retained by the CRO to (i) run a marketing process for DIP financing; and (ii) assist in maximizing value for all stakeholders through either a Plan of Reorganization (“Plan”) or a sale of the Company’s assets (a “363 Sale”).
Due to liquidity constraints, VitalPet had to accept a coercive interim DIP loan from its pre-petition lender. Under severe time constraints, Gordian then obtained more favorable DIP terms from a third party that lowered costs and loosened restrictive covenants in the interim DIP. This provided the Debtor the freedom to follow a value maximizing path.
Concurrently with the DIP outreach, Gordian ran a broad marketing process to identify a buyer or Plan sponsor. Gordian contacted 80+ parties (strategic and financial). The process resulted in the sale of Vitalpet’s assets to Destination Pet, LLC for $47.5mm against LTM EBITDA of just $200,000. Pre-COVID, the sale was meant to close in April 2020, but as the COVID crisis ramped up, Gordian was able to accelerate the close to mid-March (when the world was becoming “frozen”) at a purchase price reduction of just 1.5%.
The process is expected to satisfy all claims and provide a recovery to certain preferred equity holders.