With American Tire Distributors filing for Chapter 11 bankruptcy this week, Tire Pros dealers have remained optimistic about their parent company’s recapitalization approach.
“From a business standpoint, it was the best thing they could ever do,” says Bud Luppino, owner of Bud’s Tire Pros in Riverside, California. “This is a great deal for them. It didn’t hurt us (Tire Pros dealers) at all. It made us stronger than we were before.”
ATD filed for Chapter 11 bankruptcy Thursday to implement an agreement between its bondholders to recapitalize its debt. The agreement with approximately 75% of its bondholders states that bondholders will receive 95% of new equity in the recapitalized company and existing equity holders will receive 5% of the new equity. The agreement also states that the company intends to pay continuing manufacturer partners and vendors in full for existing claims.
The deal is meant to reduce the company’s debt by approximately $1.1 billion and increase its financial flexibility as it continues its ongoing transformation, an ATD press release said. The terms of the agreement are substantially similar to those the company previously announced in early September. In connection with the process, ATD has received commitments that would provide continued access to its credit facility plus $250 million in new financing.
The company also assured dealers Thursday that deliveries are continuing without interruption, and it will continue to provide customers with “more selection, wider and more timely availability and easy access to a complete package of tires, wheels and shop supplies.”
Many Tire Pros dealers see ATD’s plan as a way for it to move forward and eventually come out of the process as a stronger company.
“I’m not surprised,” said Howard Fleischmann, owner of Community Tire Pros in Phoenix, Arizona. “I saw it just means business as usual. They’re restructuring. They’re trying to rewrite their bills and there’s a positive side to this. That is that for vendors hanging out, they know they’ll get paid moving forward… ATD already has the structures in place, and they have the Tire Pros family behind them. Dealers know where their strength is.”
ATD promised dealers that the court process would not impact its supply chain and that were would be no changes on pricing or its offerings. Alpio Barbara, owner of Redwood General Tire Pros in Redwood City, California, agreed that filing for Chapter 11 bankruptcy was the logical next step for the company.
“There’s concern, you know, when you’re behind in rent and you can’t pay the third and fourth months,” he said about ATD announcement. “Am I jumping ship? Not yet. I’m looking at the waters and seeing what’s on the other side…. This is the reason why you don’t wanna put your eggs in one basket. We never have, so it’s concerning but it’s not earth-shattering.”
Randy Juette, owner of RJ’s Tire Pros and Auto Experts, said he’s confident in ATD, which has set an ideal distribution model for others to follow in the industry.
“It’s not going to disrupt service and it’s not going to disrupt my business,” said Juette about the company’s bankruptcy filing. “ATD is out in front of everybody doing stuff that the industry looks to see where we’re going.”