ATD enter bankruptcy proceedings
A month after its credit rating was downgraded, American Tire Distributors, Inc. (ATD), the largest tyre wholesaler not only in the USA, but in the entire NAFTA region, filed for Chapter 11 bankruptcy protection in the District of Delaware on 4 October. At the time, the company announced that it had entered into a definitive agreement with approximately 75 per cent of its bondholders on the terms of a recapitalization that would reduce the company’s debt by approximately $1.1 billion and increase its financial flexibility as it continues its ongoing transformation.
“Today we are announcing a positive, intentional and strategic next step as we move forward on a clear and expedited path to strengthen ATD’s financial position and continue our successful, game-changing transformation,” said Stuart Schuette, CEO of ATD. “We thank both our customers and manufacturer partners for the unwavering support that we have received over the last several weeks, which reflects our value proposition and our trusted relationships with them. As the industry continues to evolve, the actions we are taking will enable us to keep the power of choice alive for customers and continue serving them like no one else can.”
Schuette continued: “We are as focused as ever on providing our customers with the unparalleled selection and service they have come to expect from us. We have momentum and are continuing our efforts to lead change in the industry. We look forward to continuing to introduce innovative technology, new programs and tools over the coming months that will enable our customers to drive traffic to their business, enhance their operations and maximize their profitability. Our company has seen many changes to the tire industry over the past 80 years, and we have always succeeded by remaining focused on supporting our customers across all channels, and the consumers they serve.”
The latest news follows the unveiling of TireBuyer, a subsidiary of American Tire Distributors (ATD, a new brand identity in September. The idea is that TireBuy will help consumers buy tyres online through a “new, insightful product recommendation engine, easy search tools, proprietary fitments, seasonal updates and deals and enhanced mobile compatibility for shoppers on the go”.
Back to the refinancing arrangements, ATD’s chapter 11 statement explains that, pursuant to the terms of the agreement: Bondholders will receive 95 per cent of new equity in the recapitalized company and existing equity holders will receive 5 per cent of the new equity. The company intends to pay continuing manufacturer partners and vendors in full for existing claims. The company intends to pay suppliers and vendors in full under normal terms for goods and services provided on or after the Chapter 11 filing date. In connection with the court-supervised process, the company has received commitments that would provide continued access to the company’s revolving credit facility, plus $250 million in new financing, which, subject to court approval, will be available to support its ongoing operations.
However, the obvious question is who’s buying it?