HUNTERSVILLE, N.C. — Voting stakeholders for American Tire Distributors Inc. (ATD) have approved ATD's reorganization plan "overwhelmingly" in its efforts to emerge from Chapter 11 bankruptcy, its first major step in what promises to be a crucial week for the future of the company.
ATD said each class of creditors and holders of interest with voting rights approved the plan, including 100 percent of voting term lenders and voting shareholders and 98 percent of voting bondholders. The approval rate, ATD said, exceeded the threshold required for approval.
A confirmation hearing on the plan is scheduled to be heard before the U.S. Bankruptcy Court for the District of Delaware on Dec. 19 at 10 a.m.
The measures, which were agreed to on Oct. 24, were designed to reduce ATD's debt by approximately $1.1 billion and increase its financial flexibility. ATD filed for Chapter 11 bankruptcy protection on Oct. 4.
Under the terms of the agreement, the term-loan lenders agreed to, among other things:
- Provide half of the $250 million in new financing to support ATD's continuing operations;
- Extend the maturity of the term loan facility by three years; and
- Participate in exit financing upon ATD's completion of the court-supervised process.
"The support of our financial stakeholders has enabled us to move through this process on an expedited basis," Mr. Schuette said in a prepared statement.
"We are now entering the final phase of this process and are poised to move forward as a stronger company that is even better positioned to help our customers continue thriving and driving into the future."
As part of the agreement, bondholders will receive 95 percent of new equity in the recapitalized company, and existing equity holders will receive 5 percent of the new equity.
Should the court approve the agreement, ATD could emerge from Chapter 11 bankruptcy before the Christmas holiday.
Throughout the process, ATD has maintained the business has and will continue as usual.
Mr. Schuette expressed that to the company's 5,000 employees across North America in letter emailed to them shortly after the Chapter 11 announcement was made on Oct. 4.
"We are moving forward on a clear and expedited path to strengthen our financial position and continue our successful, game-changing transformation," Mr. Schuette wrote.
"We intend to move through this process as quickly as possible. The strong support of our bondholders will allow us to do so on an accelerated basis."
ATD's Canadian subsidiary, National Tire Distributors, has not been affected by the process.
ATD's difficulties began earlier this year when two of its largest customers, Bridgestone Americas Inc. and Goodyear, announced they were discontinuing most or all their supply relationship with the tire distributor. The two tire makers launched their own distribution joint venture, TireHub L.L.C., which began operations on July 3.
Soon after losing two major customers, Moody's Investor Service Inc. questioned whether ATD had sufficient cash reserves to cover certain projected interest payments and maintenance costs in the near future.
In late July, ATD restructured its operations internally, eliminating 100 positions at its Field Support Center (FSC) in Huntersville as part of a new strategic plan. In addition, ATD said it would reinvest in 40 new positions— in large part to bolster its Tire Pros franchisees — many of which have been filled.
Chicago-based Kirkland & Ellis L.L.P. is serving as legal counsel to ATD, while global consulting firm AlixPartners L.L.P. is an operational adviser. Investment banker Moelis & Co. L.L.C. is serving as financial adviser.
More information is available on ATD's restructuring website at ATDrecapitalization.com. Interested parties also may call ATD's restructuring hotline tollfree at 866-967-0495, or from outside the U.S., +1-310-751-2695.
Questions can also be submitted by email to [email protected] Court filings and other documents related to the court-supervised proceedings are available on a separate website administered by ATD's claims agent, KCC, at kccllc.net/ATD.