NEW YORK — Moody's Investors Service has downgraded its Probability of Default Rating for American Tire Distributors Inc. (ATD) to D-PD from Ca-PD, following ATD's decision this week to initiate Chapter 11 bankruptcy protection proceedings.
Moody's also downgraded the company's Corporate Family Rating (to Ca from Caa2 rating under review), and the rating for its senior secured term loan (to Caa2 from Caa1 rating under review). Moody's affirmed the existing C rating for the company's senior subordinated notes. The ratings outlook is stable.
"We have been expecting some form of requisite restructuring of American Tire's debt obligations for some time," Inna Bodeck, Moody's lead analyst for the company, said.
"While the bankruptcy filing will alleviate the heavy debt burden related to the company's existing subordinated notes, our downgrade of the term loan rating reflects our assessment that additional debt may ultimately need to be equitized," she added.
Huntersville, N.C.-based ATD, North America's largest independent wholesale tire distributor with fiscal 2018 sales of $5.4 billion, voluntarily filed for Chapter 11 bankruptcy protection Oct. 4 in order to allow it to recapitalize its debt.
ATD said it had reached agreement with about three-fourths of its bondholders on terms of a recapitalization that will reduce the firm's debt by around $1.1 billion and has secured a commitment for $250 million in new financing to fund the process.