ATD emerges from Chapter 11 bankruptcy

HUNTERSVILLE, N.C. — American Tire Distributors has emerged from Chapter 11 bankruptcy less than three months after initiating the process.

The announcement was made Friday, Dec. 21, two days after the U.S. Bankruptcy Court for the District of Delaware approved a reorganization plan that ATD said will reduce its debt by $1.1 billion and give it renewed financial flexibility.

As part of the latest move, ATD said it is issuing payment for all pre-petition obligations due. North America's largest tire distributor said it has $1.005 billion of financing "arranged by Wells Fargo Capital Finance to support operations and future growth initiatives."

On Dec. 17, ATD's voting stakeholders — including 100 percent of voting term lenders and voting shareholders and 98 percent of voting bondholders — "overwhelmingly" approved its reorganization plan. 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. .

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.

Stuart Schuette, CEO of ATD called it "a new beginning.

"We are a stronger company with the financial flexibility to build on an 80-year history of leadership and innovation," Mr. Schuette said. "We are laser-focused on delivering greater value for our customers and manufacturer partners, with differentiated capabilities based on advanced analytics. Our ongoing transformation means that ATD will remain the most connected and insightful automotive solutions provider for decades to come."

ATD said it will move forward by offering customers more than 50,000 SKUs, "data-driven" technology and platforms, "state-of-the-art logistics" and an array of marketing programs. The company said it will "continue driving growth, generating strong cash flows and deepening its value proposition for its customers and manufacturer partners by investing in the strategic initiatives, technologies and talent that are fueling its transformation.

Throughout the process, ATD has maintained to employees and its customers that business has been and will continue as usual.

"All of us at ATD would like to thank our customers and manufacturing partners for their continued support," Mr. Schuette said. " I also am deeply grateful to our team of more than 5,000 associates across North America.

"They are the most dedicated and experienced professionals in the industry. They live our values every day by focusing their full attention on keeping our customers thriving and driving into the future."

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 of 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 learning of ATD's losing these major customers, Moody's Investor Service Inc. questioned whether the wholesale distributor 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. served 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.