American Tire Distributors Inc.’s (ATD) recent Chapter 11 filing is the second time the company has declared bankruptcy in the last six years.
On Oct. 4, 2018, MTD reported that ATD had entered into a definitive agreement with a majority of its bondholders on terms of a recapitalization.
At the time, ATD 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."
ATD explained that it would continue to serve customers without disruption as it moved through the process. (The company’s Canadian subsidiaries at the time, including National Tire Distributors, were not part of the Chapter 11 filing.)
In addition, ATD stated that bondholders would receive 95% of new equity in the recapitalized company and existing equity holders would receive 5% of the new equity. In addition,the company said that it intended to pay its suppliers 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, ATD had 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, would be available to support its ongoing operations.
Then-ATD CEO Stuart Schuette commented on the development, stating that “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."
Near the end of October 2018, Schuette emailed out a quick update on the company’s recent business developments, stating that the company was “making significant progress with our recapitalization process that will strengthen our financial position as we continue our successful, game-changing transformation.
“We have a clear roadmap for the next steps in this process and the support of our key financial stakeholders has us on track to emerge by the end of the year as a stronger company with less debt that is even better positioned to serve our customers.
“We recognize that there was some confusion because a few of our vendors made court filings that were intended to preserve their legal rights. The fact is, we have been working with our vendors as normal and have entered into trade agreements with all of our key vendors to continue supplying us.
“We also have obtained final court approval to access more than $610 million that can be used to pay certain key and foreign vendors during the recapitalization process.
“We do not anticipate any issues with availability and product supply moving forward. We are taking care of our customers and supporting them across all channels, and the consumers they serve.
“With our strong vendor relationships, we are continuing to provide you with more selection, wider and more timely availability and easy access to a complete package of tires, wheels and shop supplies. We are committed to your success and delivering the value, unparalleled selection and service you have come to expect from our company.
Around the same time, two of ATD’s vendors, Toyo Tire U.S.A. Corp. and Nitto Tire U.S.A. Inc. , issued a joint statement to MTD when asked how the Chapter 11 bankruptcy filing was affecting them.
“We have full confidence in the ATD management team and their plan. We have supplied and will continue to supply our products to ATD on the strength of their commitment to that plan, to take care of their customers and ours.”
Quick emergence
ATD emerged from Chapter 11 on Dec. 21 after completing its recapitalization, a development that Schuette described as “a new beginning” for the embattled firm, which had lowered its debt load by $1.1 billion.
“All of us at ATD would like to thank our customers and manufacturer partners for their continued support,” Schuette stated.
Click here to read MTD's report on ATD's recent Chapter 11 filing.
