Auto parts retailers and distributors have been battling financial difficulties in 2024 as they face headwinds due to various industry challenges.
One of the leading manufacturers of wheels and wheel end products for commercial trucks and trailers, Accuride, filed for Chapter 11 bankruptcy protection on October 9 seeking a consensual restructuring of its debt to continue operating as a going concern.
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Accuride and 15 affiliates filed their petition in the US Bankruptcy Court for the District of Delaware after facing significant obstacles due to the lingering effects of the Covid-19 pandemic on the debtor's business, operational difficulties, integration challenges business shock, inflation, supply chain disruption and other geopolitical and macroeconomic forces that depressed revenues and increased costs, according to a statement from Charles Moore, the debtor's chief restructuring officer.
Related: Struggling trucking company files for Chapter 7 bankruptcy
The debtor decided that its best option was a post-petition transaction with the ad hoc group of its first lien term loan lenders for an investment or purchase of some or all of its assets. under a Chapter 11 bankruptcy reorganization plan.
Wheel Pros, which operates as a distributor and retailer of Hoonigan auto parts, filed for prepackaged Chapter 11 bankruptcy on Sept. 9 that would eliminate $1.2 billion in debt and provide about $570 million in new capital through an exit mechanism.
Under the prepackaged bankruptcy and restructuring support agreement filed in the U.S. Bankruptcy Court for the District of Delaware, Wheel Pros reached agreements with its equity sponsor Clearlake Capital Group and lenders for a consensual restructuring that will deliver 85% of its new equity holdings to first lien claim holders and the remaining 15% to new first lien lenders who will back the debtor's exit term loan.
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American Tire Distributors seeks sale in Chapter 11 bankruptcy
The latest auto parts supplier to go to bankruptcy court is giant tire and wheel replacement company American Tire Distributors, which on October 22 filed for Chapter 11 bankruptcy protection seeking the sale of its assets, loaded with more than $1.9 billion in funded debt.
The Huntersville, North Carolina, tire distributor, with 15 distribution centers and more than 80,000 retail customers in North America, filed its petition in the United States Bankruptcy Court for the District of Delaware in Wilmington, with a settlement of restructuring support backed by an ad hoc group of its pre-repeat lenders.
The debtor listed between $1 billion and $10 billion in assets and liabilities in its petition, which included unsecured business debt owed to major creditors such as Goodyear Tire & Rubber Co., which was owed more than $121.6 million. of dollars; Continental Tire North America Inc., owed more than $81 million; and Toyo Tire USA Corp., owe more than $63.3 million.
Related: Another Iconic Auto Parts Brand Files for Chapter 11 Bankruptcy
The debtor and 12 affiliates seek to obtain $1.45 billion in debtor-in-possession financing from its prepetition lenders to fund operations during the bankruptcy case, including $250 million in new money and access to $1.2 billion in financing under its prepetition agreement asset based. loan facility. Debtors will also seek the sale of all their assets in a bankruptcy auction in which their pre-recurrence lenders will act as stalking bidders.
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American Tire Distributors' ad hoc group of lenders, which represents 90% of its outstanding pre-repeat term loan debt, includes credit funds and accounts managed by Guggenheim Partners Investment Management, LLC; kkr; Monarch Capital Alternative LP; Sculptor Capital Management, Inc.; and Silver Point Capital, L.P.
The debtor attributed its financial difficulties to rising inflation following the Covid-19 pandemic and falling demand for automotive products from 2022, following the tire boom in 2019-2021, according to a statement from the restructuring director of the company, Ronald J. Bienías.
The tire boom prompted the company to expand its business, but profits began to decline in 2022 and 2023 due to new market headwinds that included customers adjusting to less expensive tires, depressed demand for consumers, increased operating costs and a contraction of sales channels.
In May 2024, American Tire Distributors was marketed for sale and received a non-binding letter of intent in June 2024, but was terminated on October 9, 2024.
Under the restructuring support agreement, the pre-repeat lenders will credit to the stalking bidder all amounts owed to them under the DIP new money claims, any amounts accrued under the DIP loan and all Term Loan Claims Prior to Recurrence in a Section 363 Bankruptcy Auction.
American Tire Distributors was founded in 1935 in Lincolnton, North Carolina, as Heafner Tire and continued to grow as a family business until selling majority ownership to private equity investors in 1999. The company changed its name to American Tire Distributors in 2002.
The company sells and delivers a variety of tire brands to retailers, including General, Uniroyal, BF Goodrich, Continental, Michelin, Cooper, Pirelli, Yokohama, Hankook, Kumho, Nexen and Toyo-Nitto. The company announced in 2018 that Goodyear Tire & Rubber was no longer one of its distributors.
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