ATD Reduces Debt by Up to $1.1 Billion

Sept. 4, 2018

American Tire Distributors Inc. (ATD) has reached an agreement in principle with holders of more than 70% of its bonds on the terms of a recapitalization transaction that will reduce the company’s debt by up to $1.1 billion. It also will provide financial flexibility as it continues its ongoing transformation.

The agreement in principle is subject to various conditions, including finalization of definitive documentation. Pursuant to the recapitalization, continuing manufacturer partners and trade vendors are expected to be paid in full for existing obligations in the ordinary course for goods and services provided.

"ATD has a strong foundation built on our unparalleled network, unique service offerings, and deep relationships with customers and manufacturer partners coupled with a game-changing transformation under way to evolve our business as our industry continues to change," says CEO Stuart Schuette. "Our journey over the past 18 months has been one of significant progress, and we are now taking steps to strengthen our financial position as we continue our transformation.

"The actions we are taking are intended to reduce our debt and create financial flexibility so we can enhance the strategic initiatives, key technologies and talent that will drive our transformation forward. The agreement we reached with our bondholders reflects their confidence in our business and paves a way for us to implement our recapitalization on an accelerated basis.

"We are confident in our future, and we look forward to keeping the power of choice alive and providing our customers the most connected and insightful automotive solutions in the industry."

Schuette says ATD's commitment to serving its customers will not change as the company's moves forward.

"I want to thank all of our associates for their continued dedication and tireless efforts. They are a winning team, and our unparalleled selling and supply chain organizations are pivotal in helping our customers thrive and drive into the future."

ATD says it has liquidity to meet its business obligations, and operations are continuing as normal throughout this process.

Kirkland & Ellis LLP is serving as legal counsel to ATD. In addition, AlixPartners LLP is serving as operational advisor, and Moelis & Company LLC is serving as financial advisor.

In a letter to its Tire Pros franchisees, Ron Sinclair, president of Tire Pros and senior vice president of retail strategy and partnerships for ATD, explained what the recapitalization will mean to them. "Here are important points you should know," he wrote.

* "The Tire Pros franchise is an important part of the ATD strategy. ATD is continuing to support you and to provide you the products, promotions and support you need to grow your business so you can serve your consumers like you always do."

* "Our commitment to innovation is unwavering. Everything we are doing continues to be driven by three customer-focused objectives: driving store traffic, enhancing your operations and maximizing your profit."

*  "ATD’s facilities and operations across our distribution network are continuing to serve customers as we always have. We have strong relationships with our manufacturer partners and will continue to provide you the support and service you need to drive your business."

"We look forward to continuing to work with you now and into the future," he added.

ATD operates more than 140 distribution centers, including 25 distribution centers in Canada, serving approximately 80,000 customers across the U.S. and Canada. It employs close to 5,000 associates across its distribution center network, including approximately 800 associates in Canada.

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