Rating Action: Moody’s assigns B3 CFR to Midwest Veterinary Partners, LLC (d/b/a “Mission Veterinary Partners” or “MVP” ); outlook stableGlobal Credit Research – 14 Apr 2021New York, April 14, 2021 — Moody’s Investors Service, (“Moody’s”) assigned a B3 Corporate Family Rating and B3-PD Probability of Default Rating to Midwest Veterinary Partners, LLC (d/b/a “Mission Veterinary Partners” or “MVP” ). Moody’s also assigned B2 ratings to the company’s proposed first-lien credit facilities, consisting of a $20 million revolver expiring 2026, a $340 million term loan due 2028, and a $75 million delayed draw term loan due 2028. Proceeds from the new first lien facility along with $90 million second-lien term loan (unrated) will be used to refinance existing debt and finance future acquisitions. The rating outlook is stable.The following ratings were assigned:Issuer: Midwest Veterinary Partners, LLC:Corporate Family Rating, B3Probability of default rating, B3-PDGtd Senior Secured First Lien Revolver due 2026 at B2 (LGD3)Gtd Senior Secured First Lien Term Loan due 2028 at B2 (LGD3)Gtd Senior Secured First Lien Delayed Draw Term Loan due 2028 at B2 (LGD3)Outlook Actions:Outlook, Assigned StableAll ratings are subject to receipt and review of final documentation.RATINGS RATIONALEMidwest Veterinary Partners, LLC’s B3 Corporate Family Rating (CFR) broadly reflects its very high financial leverage (Moody’s-adjusted debt-to-EBITDA of 9.2 times on a pro forma basis and excluding acquisitions under LOI), which Moody’s expects to persist as the company continues to use debt to fund acquisitions. Moody’s estimates include a number of adjustments and add-backs to EBITDA, which add a degree of uncertainty around the true underlying cash generating ability of the company. The rating is also constrained by the company’s modest absolute scale, and event and financial policy risks related to both the aforementioned aggressive acquisition strategy and its private equity ownership. There are risks to the company’s rapid growth strategy, including inability to integrate and manage growth, and a high level of recurring expenses which constrain cash flow. MVP’s rating benefits from favorable long term trends in the pet care sector that underpin Moody’s expectation for healthy same-store sales growth in at least the mid-single-digits.MVP’s good liquidity profile is supported by a sizable cash balance of roughly $156 million at the close of the transaction, full access under a $20 million revolving credit facility due 2026, and access to a $75 million delayed draw term loan. Furthermore liquidity is supported by Moody’s expectation of break-even to modestly positive free cash flow, over the next 12 months. These cash sources provide good coverage for the required 1% amortization (roughly $3.4 million) of its first-lien senior secured term loan.The stable outlook reflects Moody’s expectation that leverage will remain high as MVP continues to use debt to fund acquisitions, but that the company’s relatively stable business profile will result in sustained mid-single digit top line growth, along with positive, albeit modest, free cash flow.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be downgraded if operational performance deteriorates or liquidity weakens, or the company fails to generate positive free cash flow. Inability to manage its rapid growth, or if EBITA-to-interest approaches one times, could also put downward pressure on the company’s ratings.The ratings could be upgraded if the company delivers sustained revenue and earnings growth and is successful in integrating acquisitions. Moderation of aggressive financial policies, partially evidenced by debt/EBITDA sustained below 6.5 times, along with sustained positive cash flows along with healthy cash balance could also support an upgrade.Following are some of the preliminary credit agreement terms, which remain subject to market acceptance.As proposed, the credit facilities are expected to contain covenant flexibility for transactions that could adversely affect creditors, including the ability to incur incremental term loan facilities in an aggregate amount not to exceed the greater of $63.1 million and 100% of trailing four quarter EBITDA; plus an unlimited amount so long as First Lien Net Leverage Ratio does not exceed 5.50x (if pari passu secured), plus increases to first lien incremental capacity from voluntary prepayments and commitment reductions of second lien loans. A portion of the incremental, to be described in the first lien credit agreement, may be incurred with an earlier maturity date than the initial term loans.The credit facilities also include provisions allowing the transfer of assets to unrestricted subsidiaries, subject to carve-out capacities, with no additional express “blocker” provisions restricting such transfers of specified assets to unrestricted subsidiaries; and the requirement that only wholly-owned subsidiaries act as subsidiary guarantors, raising the risk that guarantees may be released following a partial change in ownership, with no explicit protective provisions limiting such guarantee releases. There are no express protective provisions prohibiting an up-tiering transaction.Social and governance considerations are material to MVP’s credit profile. The rating reflects negative social risk as a result of the coronavirus outbreak given its risk to patient and service providers’ health and safety. However, Moody’s does not consider the veterinary hospital service providers to face the same level of social risk as many other healthcare providers. Growth in the number of US households that own pets provides for a favorable long term trend in the pet care sector that underpins healthy same-store sales growth. Among governance considerations, MVP’s financial policies under private equity ownership are aggressive, reflected in very high initial debt levels following the recapitalization, as well as a strategy to supplement organic growth with material debt-funded acquisitions.The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Headquartered in Novi, Michigan, Midwest Veterinary Partners, LLC (d/b/a “Mission Veterinary Partners” or “MVP”) is a national veterinary hospital consolidator, offering a full range of medical products and services, and operating 136 general practice locations across 22 states. The company generated pro forma revenues of approximately $322 million for the fiscal year ended December 31, 2020. MVP is a portfolio company of private equity firm Shore Capital Partners.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Vladimir M. Ronin, CFA Asst Vice President – Analyst Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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