In Perspective: What ATD Filing for Bankruptcy Really Means

In Perspective: What ATD Filing for Bankruptcy Really Means

Tire Review Editor Patti Hoying says that ATD filing for Chapter 11 bankruptcy is a move that, overall, is a positive one, for dealers.

American Tire Distributors ATD

Not completely surprising was the announcement Oct. 4 that American Tire Distributors (ATD) is moving forward on an agreed upon “recapitalization,” filing for Chapter 11 bankruptcy protection.

The move is intended to lighten the financial pressures of servicing its current debt load of $1.1 billion, offering the nation’s largest tire distributor some fiscal breathing room as it continues to transform following the loss of several leading product lines earlier this year. If the agreement is approved, bondholders supporting the $1.1 billion dollar debt will receive a 95% equity stake in the company, while existing equity holders will receive only 5% of the new equity. While the drop in equity seems substantial, it may not be so bad considering the fees and interest they may have received up to this point – especially if they can take the write-off for the loss for tax purposes. I don’t pretend to have deep expertise in how the financial markets work, but I have the feeling those folks are going to be okay.

Sources within the ATD organization say that the move, overall, is a positive one. The agreement is unique in that the company will continue to pay for goods and services provided on or after the filing date, subject to the terms of the agreement. Filing for Chapter 11 allows them to make the necessary changes to their capitalization structure through court supervision and on an efficient and accelerated basis. Instead of paying out huge amounts of fees and interest to service of its $1.1 billion debt, ATD can use that money to support other parts of the business. According to ATD, 75% of their bondholders agreed to the deal.

Here’s what we know, and what we’re left wondering about:

  • ATD says it is NOT going out of business with this announcement. They are simply making an attempt to get their financial house in order after significant disruption earlier this year.
  • Deliveries to customers will continue without interruption or disruption.
  • The company says they intend to pay manufacturing partners and vendors in full, now and in the future, according to the terms of the agreement. That said, the amount of money owed to manufacturers of their top product lines is concerning, and even more concerning is whether or not those manufacturers will continue to provide product to ATD moving forward if the account is deeply in arrears today.
  • In a letter to its franchisees, ATD CEO Stuart Schuette says the Tire Pros organization “remains a cornerstone of the ATD strategy.” Tire Pros dealers we spoke with remain optimistic.
  • No timeline was yet provided. No reduction in staff was confirmed.
  • With this agreement, ATD says its balance sheet gets stronger, the company gets stronger and the process should allow the company to continue to operate as usual.

When looking at the paperwork filed, which lists the hundreds of millions of dollars owed to tire manufacturers for distributed product not to mention a half-million in hotel bills, those dollars don’t seem to be added into that $1.1 billion. Sources within ATD say most of the companies have been or will be contacted to make arrangements for payment (or perhaps for renegotiation?). While they mentioned other Chapter 11 turnarounds and success stories, such as American Airlines, Delta and General Motors, all of those companies had the additional support of some sort of government bailout. This begs the question: Is ATD too big to fail? Will another cash-flush entity come in the 11th hour? Time will tell.

Through crisis comes the opportunity for growth and reinvention. With strong leadership, more time and increased financial flexibility, ATD now has a better chance than they did a week ago to get back on track. Stay tuned.


Story may be updated.

You May Also Like

Bridgestone Retail Operations rolls out brand refresh for Tires Plus, Hibdon Tires Plus

Updates to the logo include a single-color tire mark; a logo palette comprised of Tires Plus yellow, black and red; and refined typefaces.


Bridgestone Retail Operations, a subsidiary of Bridgestone Americas, introduced a phased roll-out of new logos and refreshed brand campaigns for the Tires Plus and Hibdon Tires Plus brands. This is the first brand refresh since Bridgestone acquired the two companies in 2006.

According to Bridgestone, updates to the logo include a single-color tire mark; a logo palette comprised of Tires Plus yellow, black and red; and refined typefaces of both the Tires Plus name and Total Car Care subhead.

Yokohama’s Advan Sport V105 tires will be OE for Subaru Impreza in Europe, Latin America

Yokohama said the tire enhances the car’s handling stability and comfort while reducing rolling resistance.

OTAA to host free training for members in Akron, OH

The association said these workshops are designed to enhance technician’s technical expertise and keep them up-to-date with the latest industry advancements.

Hankook Tire debuts Great Catch Rebate through July 7

Drivers who purchase at least four tires from eligible lines will qualify for savings of up to $120.

GT Radial Formula Drift team welcomes 14-year-old driver

Minowa, who will be the newest and youngest driver in the Formula Drift 2024 pro season, will be debuting with Team Jerry Yang Racing.


Other Posts

TIA is now accepting nominations for open board of directors positions

The newly-elected board members will serve three-year terms with the potential for re-election to two additional terms.

Professional race car driver to compete on Bridgestone Potenza RE-71RS tires

Tom O’Gorman will compete on Bridgestone Potenza RE-71RS tires in the World Racing League Grand Touring Over class during the 2024 season.

Kumho Tire becomes an Official Tire of Formula DRIFT

As part of the sponsorship, Kumho Tire will receive a significant footprint at each of the eight Formula DRIFT events in the 2024 series, including track signage and activation during race weekends.

Discount Tire acquires six Suburban Tire Auto Repair Centers

The six locations in the Chicago area will continue to operate under the Suburban Tire Auto Repair Centers brand name.