US auto parts retailer files for Chapter 11

December 2024 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

December 2024 Issue

In a move designed to substantially improve its balance sheet and financial position, aftermarket vehicle enhancements provider Wheel Pros, LLC, along with certain of its North American-based affiliates, has filed for Chapter 11 bankruptcy protection.

The company’s operations outside of North America are not part of the court-supervised restructuring process.

Wheel Pros, which operates as auto parts distributor and retailer Hoonigan, made the filing in order to implement a restructuring support agreement (RSA) with a majority of its debtholders, through which it expects to eliminate approximately $1.2bn of the company’s debt and secure up to approximately $570m of new capital.

As contemplated under the RSA, the company expects to emerge under the majority ownership of a group of its current lenders which recognise the potential of the automotive aftermarket industry and are confident in Wheel Pros’ ability to continue to operate at its forefront.

The RSA contemplates a swift in-court restructuring, with emergence from Chapter 11 anticipated within two months. Wheel Pros’ global operations across brands are expected to continue without interruption during the process, with all unsecured creditors to be paid in full.

Wheel Pros’ Chapter 11 filing is another blow to the automotive industry in the US which has suffered its share of bankruptcies in 2024, with perhaps the most notable casualty being electric vehicle maker Fisker Group, which filed for Chapter 11 in June.

“The Chapter 11 filing marks an important step forward that will enable us to advance our industry leading position in the growing automotive aftermarket sector,” said Vance Johnston, chief executive of Hoonigan. “With a significantly strengthened balance sheet and new capital, this transaction will position us to invest in innovation and further drive financial performance.”

Operating as Hoonigan, Wheel Pros serves the automotive enthusiast industry with content and a wide selection of vehicle enhancements from its portfolio of lifestyle brands, including Fuel Off-Road, American Racing, KMC, Morimoto, TeraFlex, Rotiform and Black Rhino.

Utilising its expanding global network of distribution centres spanning North America, Australia and Europe, Hoonigan serves over 30,000 retailers. It has a growing e-commerce presence to provide enthusiast consumers with access to a variety of aftermarket enhancements including wheels, suspension, lighting and accessories.

The RSA also includes a motion seeking to approve a $110m term loan debtor-in-possession (DIP) facility and a $175m asset-based lending DIP facility. Wheel Pros anticipates that this will allow the business to continue operating in the ordinary course during the restructuring without impacting trade creditors, customers, employees, vendors or suppliers, and will allow the company to honour its commitments to strategic partners.

Serving as legal counsel to Wheel Pros are Kirkland & Ellis LLP and Pachulski Stang Ziehl & Jones LLP, with Houlihan Lokey, Inc. serving as investment banker. Alvarez & Marsal is serving as financial adviser and C Street Advisory Group is serving as strategic communications adviser.

Mr Johnston concluded: “With the strong support of our financial partners, we remain laser-focused on providing cutting-edge products and best-in-class service to our partners throughout the Chapter 11 and RSA processes.”

Wheel Pros received court approval for its RSA on 15 October 2024, which will allow the company to emerge from its financial restructuring process in the near future.

Fraser Tennant