💥Wag! the White Flag💥
An Ascend Performance Materials Holdings Inc. Update + The Villages Health System LLC Files
🐶Update 1: Wag! Group Co. ($PET)🐶
We initiated coverage on this POS Wag! Group Co. ($PET)(“Wag!” or the “company”) two weeks ago in here:
You’ll recall that Wag! operates through three main business segments: its (i) “Services” segment, which is its dumb AF “Uber for Dogs” platform that connects pet owners with walkers/sitters; (ii) “Pet Food & Treats” segment which is pretty self-explanatory; and, significantly, (iii) the “Wellness” segment, which includes a prescription business, pet insurance, and an insurance comparison tool. Stick a pin in that 👈 last bit.
You’ll also recall that the company had $19.9mm of debt coming due to Blue Torch Finance LLC (“Blue Torch”) in August ‘25. We previously wrote:
“The Blue Torch loan (as amended on April 4, 2025) requires quarterly amortization payments of 5% per annum (approx. $0.4mm/quarter) and interest of S+10% (approx. $1.0mm/quarter). The loan also carries a minimum revenue covenant, tested monthly, and a minimum liquidity covenant of $5mm. Wag!’s ’24 10-K included a going concern warning, and cash flow from operations has been negative in six of the last nine quarters.”
LOL, they’re baaaaaaaaack.
Ok, not exactly. Apparently Blue Torch probably got sick of getting brutally roasted by us* and, according to an April 11, 2025 8-K, peaced out by assigning its loan to an entity called Retriever LLC (“Retriever”).** Retriever appears to be affiliated with Merrick Ventures, a Florida-based private equity firm focused on technology companies including … 🤔 … a company called Spot Pet Insurance.***
Three months later, Wag! and Retriever have agreed to amend the Blue Torch financing agreement to, among other things, (i) waive an Event of Default on account of a breach of the minimum liquidity covenant and (ii) reduce said minimum liquidity amount from $5mm to $1mm until August 9, 2025, with the newly available liquidity subject to a 13-week cash flow forecast and strictly forbidden from use for, without limitation, “special employee compensation of any kind.” LOL, no 11th hour paydays for management in this deal! Lenders are wising up!!
It appeared that Wag! intended to use the latitude afforded to it pursuant to the amendment to finalize negotiations with a Pennsylvania-based company called MWI Veterinary Supply (“MWI”) for the sale of Wag!’s “Furscription” prescription business for what was an anticipated sale price of $5mm, the proceeds of which will be used for a mandatory prepayment of the outstanding loan amount (minus some employee bonus amounts).
Of course, $5mm is not enough to deal with the entirety of the loan as August approaches. Consequently, the company dropped this language in its 8-K announcing the minimum liquidity amendment:
Well, guess what? It took merely a week for the company and MWI to paper the deal for the foreshadowed $5mm; the company filed the asset purchase agreement as an exhibit to a new 8-K.
It’s not all good news, however. The company also dropped this decidedly more definitive bit:
Note the “…review process did not result in a strategic alternative transaction…” versus “[t]o date … the [c]ompany has been unable to consummate a strategic alternative transaction….” That emphasis is most definitely all ours.
The stock fell over 23.7% yesterday, Tuesday July 15, 2025, on the news — which is bad, no doubt, but not as bad as it sounds when you take into consideration that the drop was from 17c/share to 12c/share, lol. The company now has a $6.5mm market cap.
Stay tuned. There’s definitely more to come with this one. Dog lovers lament!
*In case you’re interested, no, they are (still) not a group subscriber to PETITION, lol. Wonder why!
**Blue Torch also resigned as Admin & Collateral Agent under the financing agreement, with Alter Domus (US) LLC stepping in as replacement agent.
***For some reason this company has an Insta account with 34.7k followers which makes us feel like really really big losers at 1,168 followers (follow us, 🙏). In case you’re wondering, Wag! itself has 130k followers. People love pet content on the socials.
⚡️Update 1: Ascend Performance Materials Holdings Inc.⚡️
Recall that, back on April 21, 2025, Ascend Performance Materials Holdings Inc. (“Ascend”) and 10 affiliates (collectively, with Ascend, the “debtors” and together with their non-debtor affiliates, the “company”) filed chapter 11 cases in the Southern District of Texas (Judge Lopez) with ~$2.1b in funded debt and “…the support of its key stakeholders to implement a value-maximizing restructuring transaction which will deleverage the Company’s balance sheet and enable Ascend to emerge from chapter 11 stronger than ever, with a leaner balance sheet and more competitive business.” You can find our post-filing coverage here:
That was two months, so we thought we’d check back in on the debtors to see what value-maximization looks like. Apparently, it’s this:
On June 6, 2025, the official committee of unsecured creditors (the “UCC”) filed professional retention applications looking to employ Brown Rudnick LLP (Robert Stark, Bennett Silverberg, Kenneth Aulet, Sharon Dwoskin, Daniel Kerns), Parkins & Rubio LLP (Lenard Parkins, Charles Rubio, Asiya Khan), AlixPartners, LLP (David MacGreevey), and Ducera Partners LLC (“Ducera”) (Michael Genereux). And in turn, those profs advised the debtors and the ad hoc group of term loan lenders (the “ad hoc group”), represented by Gibson, Dunn & Crutcher LLP (“GDC”) and Howley Law PLLC (“Howley”), that they expect to run up ~$19mm in fees, which includes a Ducera-payable $175k monthly and $3mm restructuring fee.
Too rich for the ad hoc group’s blood since any deal will “almost certainly” equitize the DIP.* After all, the debtors run at a loss, have YoY declining EBITDA (down $53mm in ‘24 to $116mm), and “…the Term Loan Facility is currently trading at approximately 4.26 cents on the dollar.” We’ll let the ad hoc group take it from here:
“The Ad Hoc Group seriously questions whether, and how, the employment of both AlixPartners and Ducera Partners LLC (‘Ducera’) confers a benefit on the Committee, its out-of-the-money constituency, or the estate in the particular circumstances of these chapter 11 cases. For that reason, the Ad Hoc Group … maintains that the ever-expanding administrative costs related to Committee Professionals alone, to the tune of an estimated $19 million in fees, strain credibility. Fee estimates at this level benefit only the professionals employed and do nothing to further the recovery to their constituency. “
Professionals going after professionals?
And you just know the UCC wasn’t going to sit back and take it. On July 11, 2025, it fired back. We’ll spare you the legalese on what’s market, reasonable — Ducera checks both those boxes — and in the best interests of the estates, but we couldn’t help but notice the UCC’s profs ain’t the only ones benefitting from fee estimates:
“[T]he Debtors’ professional fee statements through just the case’s first 6 weeks total over $10.7 million. The Ad Hoc Group’s counsel just submitted an invoice for one month (June) for nearly $1.4 million … Embedded within these fees is compensation for two investment bankers … (i) PJT Partners LP (‘PJT’), the Debtors’ investment banker, whose compensation includes a $12 million restructuring fee that, notably, has already been approved under Section 328(a), and (ii) Evercore Group L.L.C. (‘Evercore’), the Ad Hoc Group’s investment banker, whose compensation includes a [REDACTED] transaction fee.”
Hot damn, y’all, Johnny better get an invite to Jamie Baird’s next pool party.
In any event, the court will hash it all out tomorrow, July 17, 2025 at 3pm CT. And who knows, maybe we’ll figure out what a DIP-equitizing, value-maximizing transaction actually looks in the near term. Under the final DIP order, the debtors had until July 10, 2025 to file a plan and disclosure statement, both of which remain elusive as of writing. Perhaps because the debtors are too busy filing adversary proceedings and litigating.**
*Apparently GDC wussed out on openly engaging in professional-on-professional litigation because it didn’t sign the Ducera objection or the ad hoc group’s omnibus statement in response to the UCC’s other retention applications. Howley alone took those honors. Taking it for the team!
**On May 28, 2025, the debtors filed an adversary complaint against first-day commentator MasTec Power Corporation ($MTZ) (“MasTec”), which (i) stems from a December ‘19 agreement for MasTec to design and build a facility for the debtors and subsequent COVID-related fallout and (ii) challenges MasTec’s asserted lien against the debtors’ property and seeks a determination that $13.3mm in letter of credit proceeds drawn by the debtors is property of the estate. MasTec disputes all of that, and the lit is going to lumber on for quite a while: the court will hear adversary-proceeding dispositive motions no earlier than September 23, 2025.
😷New Chapter 11 Bankruptcy Filing - The Villages Health System, LLC😷
On July 3, 2025, Florida-based The Villages Health System, LLC (“TVH”) filed a chapter 11 bankruptcy case in the Middle District of Florida (Judge Vaughan). TVH is “… a premier health care provider in North Central Florida that operates primary and specialty care centers … in the fields of cardiology, neurology, rheumatology, podiatry, urology, gynecology, pain intervention and management, and behavioral and mental health.” To put a number on it, it’s ten care centers.
TVH has been working a good while to find a buyer, employing Evercore Group, LLC ($EVR) back in September ‘22, although CRO and first day declarant Neil Luria, of GBH SOLIC Holdco, LLC (“SOLIC”), never bothered to tell us what was driving that. (PETITION NOTE: keep reading because, lol, we could guess). In any event, for the first year, TVH and EVR focused on “… evaluating ad hoc in-bound interest from a select group of counterparties with either affiliations with TVH and its owners, or managed care health plans that were present within the TVH network.”
But apparently that yielded bupkis because in September ‘23, EVR started soliciting interest from strategics. Seven months later, in April ‘24, Humana, Inc. ($HUM)-affiliate CenterWell Senior Primary Care (Vitality), Inc. (“Centerwell”) put its John Hancock on a term sheet, which contemplated an out-of-court equity purchase and going through all the third-party rigamarole that entails.
Alas, “… coding issues …” surfaced. To make a long story short, TVH’s care centers are located smack dab in the eponymous The Villages, Florida, a monster 80k-populated, age-restricted (read: full of geezers) community. Because of that last adjective, basically every resident is a Medicare patient, and TVH receives monthly payments per member for each Medicare Advantage (“MA”) plan beneficiary it treats. How much? It depends. The Centers for Medicare and Medicaid Services (“CMS”) pays out to MA plans based on a risk adjustment model that combines clinical risk factors with so-called hierarchical condition categories (“HCCs”) to output a score meant to reflect a patient’s relative level of illness. The higher the score, the more complex the patient and the higher the payment. The perverse incentive is painstakingly obvious (🤑🤑🤑). We’ll let Mr. Luria step in here:
“In approximately August 2024, TVH became aware of a potential issue with respect to its HCC guidance. At that time, TVH learned that it may have submitted HCC diagnosis codes that were not clinically supported or otherwise did not meet Medicare coding and payment guidance.”
“Potential.” “May have.” We salute the caginess, Neil. Anyway, TVH conducted an investigation with the help of Foley & Lardner LLP, Goodwin Procter LLP, and FTI Consulting Inc. ($FCN)(“FTI”), which unveiled “… codes TVH submitted that did not appear to be supported by a sufficiently documented clinical basis.” Because three profs weren’t enough, TVH also onboarded Alvarez and Marsal (“A&M”) “… to advise on its compliance functions” and “recently” poached A&M’s Christina Steiner to serve as chief compliance officer, demoting the prior CCO in the process.*
In December ‘24, TVH voluntarily came clean with the Office of Inspector General (“OIG”) for the Department of Health & Human Services and, since late January ‘25, has been in communications with OIG and the Department of Justice (the “DOJ”) regarding the fraud issues. In April ‘25, TVH provided FTI’s preliminary analysis to OIG and DOJ, which indicated “potential” coding-driven overpayments from ‘20 to ‘24 totaling at least THREE HUNDRED AND FIFTY MILLION DOLLARS.
Here’s a live shot of CEO Bob Trinh:
And let’s roll the tape on CenterWell’s equity deal.
Like, no sh*t. Someone better be wearing an orange jumpsuit before this is all over. In fairness to CenterWell, though, it didn’t peace out, choosing instead to rework the docs into a stalking horse asset purchase agreement (“APA”),** which contemplates a 🥜-by-comparison headline $50mm purchase price and the following postpetition timeline:
To get to the sale, TVH got a $39mm DIP loan from its totes-not-sus affiliate PMA Lender, LLC (“PMA”), composed of $24mm in new money ($5mm interim) and a final order roll-up of $15mm that PMA lent back in April ‘25 to fund budget shortfalls and other opex, which is TVH’s only funded debt.*** The DIP carries interest on the new money only at a flat 12% and, aside from payment of lender professionals, doesn’t have any fees. It has a few sale milestones of its own too …
… which, you know, ain’t really pressing. Kinda makes sense: the bankruptcy clearly has bigger issues.
The court held a 1.75-hour first-day hearing on July 9, 2025, at which all requested relief was granted. But during the hearing, Sullivan & Cromwell LLP’s Andy Dietderich got up on behalf of UnitedHealthcare Insurance Company of America (“UHICA”), the largest Medicare Advantage payer in TVH’s system, to preview an upcoming issue. Recall that $350mm. CMS wants it back, and UHICA faces contingent exposure since the CareWell sale falls a few bucks short. $300mm, give or take. Given that, UHICA ain’t at all chill with PMA being the bankruptcy’s long-term DIP lender. DIPs confer too much debtor control to lenders and for UHICA to avoid getting stuck with a huge slice of the tab, TVH is going to have to get litigious with its affiliates. But because the DIP’s economics are well below market and there ain’t no fees, Mr. Dietderich, echoed by the US trustee, saved the battle for another day.
Judge Vaughan scheduled the second-day hearing for July 23, 2025 at 10am ET, where she’ll consider all first-day relief other than the DIP on a final basis and TVH’s proposed bidding procedures. Due to its non-pressing milestones and Mr. Dietderich’s spiel ☝️ there, the DIP will simmer until August 11, 2025 at 2pm ET. Plenty of time to stock up on 🍿.
TVH is represented by Baker & Hostetler LLP (Elizabeth Green, Jimmy Parrish, Andrew Layden, Elyssa Kates, Michael Delaney, Scott Prince, Ben Taylor) as legal counsel, SOLIC (Neil Luria) as financial advisor and CRO, and EVR (Neal Patel) as investment banker. Anna Phillips is TVH’s independent director. CenterWell is represented by Latham & Watkins LLP (Caroline Reckler, Andrew Sorkin, Brian Mangino, Amber Banks) and Venable LLP (Paul Battista, Eric Jacobs) as legal counsel. PMA is represented by Frye, O’Neill & Mullis, P.A. (Lara Roeske Fernandez, Rhys Leonard) as legal counsel. UHICA is represented by Sullivan & Cromwell LLP (Andy Dietderich) as legal counsel.
*We haven’t a clue what happened to these profs. Perhaps the mandates simply ended, but regardless, they ain’t around for the BK. None appear in TVH’s top 20 either.
**If approved as stalking horse and an alternative transaction closes, CenterWill will receive a $1.5mm break-up fee and an up-to $1.5mm expense reimbursement.
***TVH also owes (i) ~$200k spread across ~100 vendors and (ii) an aggregate ~$15-22.5k to 200-300 patients on account of uncashed checks, but they may as well write off the debt now.
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.
🍾Congratulations to…🍾
Fox Rothschild LLP (Stephanie Slater Ward, Michael Menkowitz, Jesse Harris) for securing the legal counsel mandate on behalf of the official committee of unsecured creditors in the Meyer Burger (Holding) Corp. chapter 11 bankruptcy cases.
Gray Reed (Jason Brookner, Aaron Kaufman, Amber Carson, Emily Shanks) for securing the legal counsel mandate on behalf of the official committee of unsecured creditors in the Higher Ground Education Inc. chapter 11 bankruptcy case.
M3 Advisory Partners LP (Robert Winning) for securing the financial advisor mandate on behalf of the official committee of unsecured creditors in the Everstream Solutions LLC chapter 11 bankruptcy cases.