HUNTERSVILLE, N.C. — American Tire Distributors Inc. (ATD) has taken the next step in its bankruptcy protection process, entering into a "stalking horse" asset purchase with a group of its lenders including credit funds and accounts managed by four equity firms.
ATD, the largest independent wholesale tire distributor in the U.S. with 2023 sales of $5.7 billion, identified the lenders as Guggenheim Partners Investment Management, L.L.C.; KKR, Monarch Alternative Capital L.P.; Sculptor Capital Management Inc.; and Silver Point Capital, L.P. They are collectively called the Ad Hoc Lender group.
A stalking horse purchase agreement generally sets a minimum price for a company's assets, used as the starting bid in a court-ordered auction. The stalking horse bidder makes a binding offer to purchase the assets, conditional on the company not receiving a better offer.
The move often is made to protect a debtor from unreasonably low bids for the assets. A stalking horse bidder is offered incentives, such as expense reimbursements and breakup fees, to secure the deal.
The term "stalking horse" derives from the hunting tradition of hiding behind a horse to stalk game.
The U.S. Bankruptcy Court for the District of Delaware approved the bidding procedures for the sale as well as set forth the procedure for submitting bids as a result of a hearing held Nov. 26.
The deadline to file and serve "stalking horse" objections is Dec. 27. The deadline for bids is Jan. 10 at 11:59 p.m. EST.
If necessary, an auction would be held Jan. 13, beginning at 10 a.m.
The winning bidder would receive notice on Jan. 13 according to a court-approved timeline, and any objections to the sale must be done by Jan. 14. A sale hearing will be conducted on Jan. 16 at 2 p.m.
In a filing with the bankruptcy court, Rachel Murray, managing director at Moelis & Co. L.L.C., the financial advisor and investment banker to the debtors, wrote that the bidding process is "designed with an intent to seek to maximize the value received for the assets under the circumstances by facilitating a fair and competitive bidding process where potential bidders are encouraged to participate and submit competing bids within the specified time frame for the assets, all with the backdrop of the debtors having executed the Stalking Horse Agreement."
One the bidding ends, Murray wrote, "the debtors will have an opportunity to consider all competing offers and select the offer(s) (including combinations thereof) that they deem to be the highest or otherwise best offer(s) for the assets," calling it "in the best interests of the debtors' estates under the circumstances."
Among the the debtors listed in the bankruptcy case are: American Tire Distributors Inc.; ATD New Holdings II Inc.; ATD Technology; Hercules Tire International Inc.; Terry's TireTown Holdings L.L.C.; The Hercules Tire & Rubber Co.; Tire Pros Francorp L.L.C;' Tirebuyer.com L.L.C.; and Torqata Data and Analytics L.L.C.
ATD said it will operate normally throughout the sale.
Jim Bienias, chief restructuring officer of ATD, and partner and managing director at AP Services L.L.C., an affiliate of AlixPartners, L.LP., called the move "the expected next step in our process to best position ATD for long term-success and as a stronger partner to manufacturers and customers who rely on us for their business needs."
He said the Ad Hoc Lender Group supports and believes "in our business and associates. We look forward to working with them as we continue our court-supervised process to transition the company's ownership and ensure value is maximized for all stakeholders."
All of ATD's assets will be acquired through a credit bid of certain of its funded debt, according to the asset purchase agreement, "as well as additional consideration including the assumption of postpetition trade payables and other liabilities."
ATD said the move will reduce its debt by $1.3 billion and "significantly enhance its operational flexibility."
The process, ATD said, will be subject to the U.S. Bankruptcy Code sales process, during which ATD "may consider other bids submitted by third parties in accordance with certain court-approved bidding procedures."
In August, ATD hired Michael Feder as interim CEO, replacing Stuart Schuette, who resigned after serving as CEO and president since 2016. Feder previously was a manager director at AlixPartners, a global consulting firm, for 23 years.
Kirkland & Ellis L.L.P. is serving as legal counsel, Moelis is serving as investment banker, and AlixPartners is serving as restructuring advisor to ATD.
Akin Gump Strauss Hauer & Feld L.L.P. is legal counsel for the Ad Hoc Lender Group and Perella Weinberg Partners L.P. is a financial advisor.
Otterbourg P.C. is representing the lenders as legal counsel and Carl Marks & Co. is serving as financial advisor.
"All of us at ATD are grateful for the support we have received from our manufacturer partners and customers since we began this process," Bienias said. "We look forward to continuing to work with them and help them drive their businesses. I'm also thankful to all of our associates for their continued hard work and dedication to ATD."
