Lenders to Athletico Physical Therapy are in discussions to potentially take ownership of the business by swapping their debt to equity, according to two people familiar with the matter, as a wave of distress continues to ravage private equity-owned healthcare rollups.
Certain lenders have been negotiating with sponsor BDT Capital Partners on ways to delever, sources said. BDT would likely remain a meaningful shareholder having shown support for the company in the past, one of the people said.
Athletico has shown mounting signs of strain, with its $875m term loan SOFR+420bps due February 2029 trading close to 51 cents on the dollar for the last several months. It also has a $100m revolving credit facility coming due in February 2027.
Citing the quickly approaching maturity wall, little cash on the balance sheet and projected leverage of 11x-12x for the year, S&P revised its outlook to negative from stable in July 2025, reaffirming its CCC+ rating.
Athletico has relied heavily on outside funding to cover cash flow deficits, including sponsor funding in 2023, accounts receivable financing in 2024 and asset sales in 2025, according to S&P and previous 9fin reporting. “Considering our expectation that cash flow deficits will persist through 2025 and possibly into 2026, we believe liquidity will weaken because external sources may no longer be an option,” S&P analysts wrote last year.
Physical therapy clinics are struggling to recruit and retain staffers, according to S&P and a person familiar with the sector. Physical therapists are being required to spend more years in school while pay and benefits have largely stagnated, leading to high rates of turnover.
“It's more expensive and harder to become a [physical therapist]. So you graduate with $150,000 in debt and go take an $80,000 a year job,” the person familiar with the sector said. “There are structural issues with the industry right now.”
Staffing shortages have caused patient volume to fall. In 2024, Athletico’s revenue grew 2.5%, far below S&P’s 6%-7% projection per the July report. The company also struggled with Medicare reimbursements, a problem afflicting hospitals, mental health clinics and rehabs. Growing problems led creditors to tap Paul Hastings and PJT for advice, 9fin previously reported.
Should creditors take over the business, Athletico will join a growing collection of healthcare businesses sponsors have turned over to their lenders in the face of mounting distress. Harvest Partners has lost two dental businesses in the span of a few months, while lenders seized back-to-back behavioral health companies from Webster Equity Partners.
PJT, Paul Hastings, Athletico and BDT did not respond to requests for comment.
