BY Fraser Tennant
In what is the latest auto parts provider to head to bankruptcy court, American Tire Distributors (ATD) has filed for Chapter 11 bankruptcy in order to implement a restructuring support agreement (RSA).
The Chapter 11 filing is the second time ATD has sought bankruptcy protection in six years – one of a number of auto parts retailers and distributors that have been battling financial distress in 2024 as they face headwinds from several industry challenges.
The RSA contemplates transitioning ownership of the company through a competitive sale process with certain lenders, including credit funds and accounts managed by Guggenheim Partners Investment Management, LLC, KKR, Monarch Alternative Capital LP, Sculptor Capital Management, Inc. and Silver Point Capital, L.P.
The contemplated transaction would eliminate a significant amount of debt and provide access to new capital, positioning the business as a stronger partner to manufacturers and customers who rely on ATD to improve their productivity, profitability and performance.
“For nearly 90 years, ATD has continuously evolved to meet the dynamic shifts and challenges facing the auto aftermarket,” said Michael Feder, interim chief executive of ATD. “We are now taking further steps to position ATD for our next phase as a stronger distribution partner to our manufacturers and customers as we return to our roots and hone our core value proposition as a wholesale distributor.
“Since being named interim chief executive, I have seen how impactful our business is to the manufacturer partners, customers, associates and communities we support, and this process will serve to reinforce those relationships,” he continued. “Our operations remain steady and, by moving forward with new owners on stronger financial footing.”
To ensure continued business operations, ATD has secured commitments for $250m in new financing from the aforementioned lender group, as well as access to $1.2bn in debtor in possession (DIP) financing from lenders under the company’s prepetition asset-based lending (ABL) facility , in the form of post-petition financing credit facilities.
Upon court approval, the DIP financing, coupled with cash generated from the company’s ongoing operations, is expected to provide sufficient liquidity to support the business during the Chapter 11 and RSA processes.
Mr Feder said the company was confident that entering into these processes with the support of the lender group would enable ATD to execute its business strategy and achieve our long-term objectives.
News: American Tire Distributors lines up sale to lenders in bankruptcy