American Tire Seeks Bankruptcy After Deal With Lenders
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American Tire Distributors Inc., which sought bankruptcy protection in 2018 after the defection of two major manufacturers, has filed for Chapter 11 again as it considers a sale process to cut debt.
The company made the voluntary filing in Delaware with $1.9 billion of debt, according to a court document. It has entered into a restructuring support agreement with lenders “that contemplates transitioning ownership of the company through a competitive sale process,” according to a statement.
American Tire Distributors ranks No. 32 on the Transport Topics list of top wholesale/retail carriers in North America.
The lender group, which represents 90% of the company’s term loan, is providing a so-called stalking horse bid, meaning that it’s subject to better offers, should any materialize, according to the filing. The cohort includes Guggenheim Partners Investment Management, KKR & Co. Inc., Monarch Alternative Capital, Sculptor Capital Management Inc. and Silver Point Capital.
American Tire will continue to operate across its nationwide network. It has received commitments for $250 million in new financing from the lender group, and access to $1.2 billion from lenders under an asset-based lending facility, according to the release.
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The company was thrown into disarray in 2018 when the makers of Goodyear and Bridgestone tires decided to deal directly with consumers through their own networks. In what a company executive at that time described as an almost simultaneous blow, Sears Holdings Corp.’s auto centers agreed to install tires bought on Amazon.com.
Profits got a temporary boost after the pandemic, as a sharp decline in auto sales triggered a surge in demand for used cars and replacements parts, such as tires. But margins rapidly narrowed and the company suffered as customers moved toward lower-priced products, the company’s chief restructuring officer said in a court filing.
