Direct lenders to Zips Car Wash are in discussions to take the keys of the business from financial sponsor Atlantic Street Capital in the latest sign of distress in the private capital space, according to two sources familiar with the matter.

Paul Hastings is advising lenders on the talks and AlixPartners is also involved in a turnaround capacity, the sources continued. Evercore is working with Zips along with Kirkland & Ellis, said one of the sources and an additional source familiar with the matter.