American Tire Distributors (ATD) has reached an agreement in principle with holders of more than 70 percent of its bonds on the terms of a recapitalization that would reduce ATD’s debt by as much as $1.10 billion. The transaction, which is still subject to various conditions, is designed to provide financial flexibility as ATD continues its transformation.
ATD has the liquidity to meet its business obligations, and operations are continuing as normal throughout the process, according to the company. Following the recapitalization, manufacturer partners and trade vendors are expected to be paid in full for existing obligations for goods and services provided.
“ATD has a strong foundation built on our unparalleled network, unique service offerings, and deep relationships with customers and manufacturer partners, coupled with a game-changing transformation under way to evolve our business as our industry continues to change,” ATD CEO Stuart Schuette said in a statement.
“Our journey over the past 18 months has been one of significant progress, and we are now taking steps to strengthen our financial position as we continue our transformation,” Schuette said. “The actions we are taking are intended to reduce our debt and create financial flexibility so we can enhance the strategic initiatives, key technologies and talent that will drive our transformation forward.”
The agreement is ATD’s latest move after Bridgestone Americas and the Goodyear Tire & Rubber Co. ended their distribution relationships with the company in favor of TireHub LLC, a tire distribution joint venture the tire companies started in early July. ATD eliminated nearly 100 field support center positions in July, with plans to add 40 new employees, as part of the restructuring.
The agreement with bondholders is subject to various conditions, including “finalization of definitive documentation.”
Kirkland & Ellis LLP is legal counsel to ATD. AlixPartners LLP is its operational advisor, and Moelis & Company LLC is its financial advisor.