Feb 6, 2023
TPG’s Pet-Care Bet Ends in Bankruptcy as Costs, Probe Take Toll
(Bloomberg) -- Independent Pet Partners, the parent of several regional pet-care chains, filed for bankruptcy as the weight of rising costs, pandemic-era closures and reports of a potential link between certain dog food and heart disease strained the business.
The TPG-backed company listed $182 million of assets and liabilities of about $215 million in its Chapter 11 petition filed alongside 12 affiliates in Delaware on Sunday. The firm plans to sell certain business lines, according to the filing.
The company formed in 2017 as a consolidator of independent pet stores amid increasing demand from doting “pet parents” for a one-stop shop for products like grain-free pet food and specialty chew toys along with grooming and veterinary services, according to court papers.
A representative for TPG declined to comment.
Problems began in 2019 after the Food and Drug Administration began investigating the rising diagnoses of a potentially fatal heart disease in dogs based on consumer reports that suggested a link between the disease and grain-free dog food. While no link was found, customers “immediately” changed their buying habits away from the dog foods the chain specialized in resulting in an estimated $10 million in lost sales, per an adviser’s affidavit.
As the company was recovering, the pandemic set in, shuttering stores and dampening sales as a strained supply chain caused costs to skyrocket. The combination led to a liquidity crunch that TPG and certain lenders tried to address by restructuring the company’s debt in late 2020. But rising inflation continued to impact the pet chain’s margins and customers began opting for cheaper pet-care products, the filing states.
Efforts to sell the company began last summer but after no buyers emerged, the company and its advisers opted to file for bankruptcy protection, per the affidavit. Under the supervision of a bankruptcy judge, the pet care chain parent is seeking to sell certain assets including 66 stores as a going-concern, while liquidating remaining assets and shutting down stores.
A group of lenders including Main Street Capital Corporation, Newstone Capital Partners and CION Investment Corporation is providing about $27 million in bankruptcy funding, which includes around $9.5 million in new money commitments, pending court approval. The group is also providing a stalking horse bid, including a $60 million credit bid, the filing shows.
In November, the group stepped ahead of other lenders by making about $9 million in loans to the struggling company secured by liens and claims on all assets senior to that of IPP’s pre-existing debt.
The Woodbury, Minnesota-based company operates 159 stores across the country operating regionally under different names: Chuck and Don’s, Kriser’s Natural Pet, Loyal Companion and Natural Pawz. The company also owns three private label pet brands — Roosevelt, Attachment Theory and Wild Saint — and operates an eCommerce site. Last year, the businesses generated about $220 million in net sales, according to the court filing.
IPP has about 850 full-time employees and another 450 part-time workers.
The case is Independent Pet Partners Holdings, LLC, 23-10153, US Bankruptcy Court, District of Delaware (Delaware).
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