The recent downfall of the eCommerce startup Thrasio has ignited a contentious dispute among its former private equity investors.
Oaktree Capital Management has dispatched a letter to fellow private equity firms Silver Lake and Advent, reproaching them for their management of Thrasio, as reported by the Financial Times (FT) on September 8. Collectively, these firms had backed Thrasio, which filed for bankruptcy earlier this year.
In the letter to investors, which was reviewed by the Financial Times, Oaktree expressed that its confidence in Silver Lake and Advent was “ill-placed.”
“We believed that Advent and Silver Lake, seasoned PE firms with whom we have collaborated previously, would steer the ship effectively and professionalize operations,” the firms stated, noting, “this assumption has proven erroneous.”
“We lacked adequate oversight and instead depended on our alignment with our sponsors,” they declared.
“This was evidently a miscalculation: we anticipated a more prudent and meticulous capital deployment for growth, yet our trust was misguided.”
PYMNTS has reached out to Silver Lake for a response, but has yet to receive any feedback. Representatives from both Oaktree and Advent have declined to comment.
The Financial Times highlights that public criticisms among prominent investment managers are a rarity, as private equity firms frequently collaborate across diverse ventures and must maintain amicable relations.
Thrasio, which operates as a third-party aggregator for Amazon products, was once valued at an impressive $6 billion.
However, reports surfaced last year indicating that the company was navigating substantial financial troubles, exacerbated by a decline in online spending following the COVID-19 pandemic, and was contemplating restructuring strategies.
According to the FT, Thrasio emerged from bankruptcy in June, with newly appointed CEO Stephanie Fox stating the company boasts a “clean balance sheet, fresh capital, and a renewed focus on our core business of brand-building.”
Nevertheless, a subsequent report from S&P Global Ratings cautioned that the company’s capital framework was “untenable,” forewarning of a potential default within the upcoming year due to restricted liquidity and limited covenant headroom.
As emphasized by PYMNTS in February, the company’s bankruptcy followed a tumultuous period for the aggregator sector, during which Benitago Group filed for bankruptcy in 2023, and Apollo sought a buyer for its aggregator subsidiary Perch.
“As funding diminishes and macroeconomic pressures bear down on aggregators, the burden of debt and obligations has escalated beyond what these firms can sustain,” PYMNTS noted.
“Operating expenses have risen significantly, especially as aggregators have aided in duties ranging from renegotiating vendor contracts to optimizing supply chains and transitioning the acquired companies into direct-to-consumer models.”
Source link: Pymnts.com.
