With more than $600 million in debt to its top vendors, American Tire Distributors (ATD) and its subsidiaries have been granted interim permission by the court to allow them to pay back some of that debt to “critical vendors” during its Chapter 11 restructuring, with a final order approval expected by the end of October.

ATD’s critical vendors are its suppliers that meet the court’s definition of companies ATD can’t do business without, which include some of the top tire manufacturers in the world. ATD, the nation’s largest tire distributor, is asking the court to pay a least a portion of its debts to these vendors it incurred before filing for bankruptcy to ensure there is no interruption of product availability to its customers, which include Tire Pros dealers.

Courts typically allow larger companies like ATD to pay at least a portion of debts it acquired before filing so that its critical vendors are more likely to keep supplying them product, according to the Southeastern Bankruptcy Law Institute. Keeping supply coming from those vendors can also make it easier for the company to reorganize successfully, the institute states.

While the list of companies ATD considers its critical vendors is not public record, court documents say ATD “must be able to stock replacement tires from leading manufacturers and brands such as Michelin, BFGoodrich, Continental, Pirelli and Cooper.” Combined, ATD owes those tiremakers more than $280 million in debt, according to a list of its top 30 creditors with unsecured claims in its court filings.

READ: What Does ATD Naming Critical Vendors Mean for Tire Dealers?

MORE: ATD’s Top 30 Creditors 

Those tiremakers plus Sumitomo Rubber North America, Sailun Jinyu Group and Ryder Transportation Services were also appointed to ATD’s committee of unsecured creditors, which the Department of Justice says aims to increase creditor participation in the Chapter 11 process.
Those on the committee represent all unsecured creditors as a group and may participate in the forming of ATD’s reorganization plan.

When asked about their relationship with ATD, many of those companies and other key tiremakers expressed their support for ATD’s Chapter 11 restructure.

Continental issued a statement saying, “ATD remains a strong partner for Continental, and we continue to support them as they work through their current transition activities.”

Pirelli said in a statement that they have a healthy relationship with ATD and look to support them as they reorganize their business. Cooper indicated that there should be no disruption in the supply of Cooper products from ATD.

Michelin also expressed its support for ATD in a statement, saying “Michelin supports ATD’s efforts to accomplish an orderly restructuring through Chapter 11. ATD is an important component of our company’s long-term distribution strategy. Michelin continues collaborative discussions with ATD so that our companies can continue business as usual in the U.S. We expect that ATD will emerge as a strong and competitive player in the distribution marketplace.”

Toyo Tire USA Corp. and Nitto Tire USA Inc. said in a joint statement, “We have full confidence in the ATD management team and their plan. We have supplied and will continue to supply our products to ATD on the strength of their commitment to that plan, to take care of their customers and ours.” Nexen Tire America Inc. also indicated that ATD remains a very important strategic partner.

For ATD’s critical vendors to get paid, they have to return to “normalized trade terms,” such as a normal delivery and payment schedule, with ATD, court record states.

ATD has received interim permission from the court pay its critical vendors “in an amount not to exceed $113.3 million” and is seeking final court approval to pay its critical vendors $239.7 million, court documents say. The court is expected to issue a final order approval by the end of October.

The company has also received interim permission to pay the debt it owed foreign and other certain vendors before it filed for Chapter 11 bankruptcy and is seeking final approval to pay those vendors approximately $372 million.

FULL COVERAGE: ATD’s Chapter 11 Restructure and Company News