"We believed that Advent and Silver Lake, experienced PE firms with whom we have partnered numerous times, would be steady hands at the helm and able to professionalise the business," wrote the Oaktree team, including co-founder and CIO Bruce Karsh and two portfolio managers. "This proved to be incorrect."

“We didn’t have appropriate controls in place and instead relied on our alignment with the sponsors,” they continued. “This was clearly an error: we expected more judicious and cautious deployment of capital for growth, but our trust was misplaced.”

Founded in 2018, Thrasio was one of the earliest attempts to roll-up third-party Amazon retailers into a scaled platform. At its peak, the company was acquiring two to three brands per week and reached a $6 billion valuation in 2021 — at one point holding talks with Michael Klein’s Churchill Capital over a potential $10 billion SPAC deal.

The company's February Chapter 11 filing blames a post-pandemic slowdown in consumer spending, made worse by the company's prior attempts to ramp up operations at the peak of the cycle. Struggling to meet demand and defend market positioning, Thrasio overcorrected and fell into a mess of inventory over-purchasing, logistics complexities, and bloated headcount. By the time it brought in AlixPartners to lead a late-2022 restructuring, the company had accumulated over $700 million of excess inventory, which it had spread across 200 different leased warehouses.

The company’s filing listed nearly $3.4 billion in outstanding debt and preferred equity financing that had been burned through in a matter of years. According to unsecured creditors, a result of “possible self-dealing, gross negligence, mismanagement, and breach of fiduciary duties.”

Oaktree says Silver Lake and Advent should have foreseen these obvious missteps and blames them for overly optimistic projections. "Thrasio did extraordinarily well during the pandemic, and it mistakenly extrapolated consumers' strong spending on goods well into the future and used these expectations to justify paying more for acquisitions," they wrote.

Various e-commerce publications cite Thrasio deals with EBITDA multiples in the mid-to-high single-digits range for 'brands’ whose sole channel was Amazon. Prior to the emergence of aggregators like Thrasio, a 1-to-3x multiple was standard for such assets.

Oaktree also faults itself for not pushing for changes. "In hindsight, we now realize that we should have replaced the management team earlier rather than waiting for the equity sponsors to act."

The letter's attempt at reputation preservation hasn't gone entirely to plan. The Financial Times quotes one limited partner who expressed skepticism: "I appreciate their candor, but on the other hand, that is not something one should be proud of. Frankly, you are a $16 billion fund, do you really need to learn not to outsource [oversight] to other partners?"

Thrasio emerged from bankruptcy in June with a new $90 million first-out term loan and a $276 million second-out term, though S&P promptly assigned a CCC issuer rating and noted that, absent drastic changes, "a default is inevitable in the subsequent six months."

"We believe its capital structure remains unsustainable due to its negative EBITDA, negative FOCF generation, and tight liquidity of about $60 million upon emergence."

Lenders under the pre-petition Thrasio credit facility received take-back debt and equity in the reorganized entity.