American Tire Distributors Inc. (ATD) has entered into a definitive agreement with a majority of its bondholders on the terms of a recapitalization. To implement the agreement, the company voluntarily filed for reorganization under Chapter 11.
The company said the definitive agreement with close to 75% of its bondholders would reduce its debt by approximately $1.1 billion "and increase its financial flexibility as it continues its ongoing transformation." The terms of the agreement are substantially similar to those contemplated by the agreement in principle the company previously announced on Sept. 4, 2018.
The company filed for reorganization under Chapter 11 of the United States Bankruptcy Code in the District of Delaware.
ATD said its operations across its distribution network are continuing to serve customers without disruption as it moves through this process. The company’s Canadian subsidiaries, including National Tire Distributors, are not part of the court-supervised process and continue to serve customers "as they always have."
Pursuant to the terms of the agreement, which is subject to court approval,
* bondholders will receive 95% of new equity in the recapitalized company and existing equity holders will receive 5% of the new equity. In addition,
* the company intends to pay continuing manufacturer partners and vendors in full for existing claims under normal terms for goods and services provided on or after the Chapter 11 filing date.
In connection with the court-supervised process, the ATD 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.
CEO Stuart Schuette commented on the agreement in an official ATD press release. Here are his remarks in their entirety.
"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. 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.
"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.
"On behalf of ATD’s leadership team, I would like to thank our associates, whose talent, hard work and dedication will continue to be the driving force behind ATD throughout this process."
Additional information is available on ATD’s restructuring website at www.ATDrecapitalization.com. Court filings and other documents related to the court-supervised proceedings are available on a separate website administered by ATD’s claims agent, Kurtzman Carson Consultants, at www.kccllc.net/ATD.
Kirkland & Ellis LLP is serving as legal counsel to ATD. AlixPartners LLP is serving as operational advisor and Moelis & Company LLC is serving as financial advisor.
For more information on ATD's reorganization under Chapter 11, visit "Answers to 31 FAQs about ATD's Chapter 11 Filing."