A massive US manufacturer now files for Chapter 11 bankruptcy as it seeks a consensual restructuring of its debt to continue operating.
In 2024, auto parts retailers and distributors are grappling with significant financial difficulties due to various industry challenges.
Accuride, a major manufacturer of wheels and wheel-end products for commercial trucks and trailers, filed for Chapter 11 bankruptcy protection on October 9.
The company is seeking a consensual restructuring of its debt to continue operations.
Accuride, along with 15 affiliates, submitted its petition to the U.S. Bankruptcy Court for the District of Delaware, citing the lasting impacts of the COVID-19 pandemic, operational issues, inflation, supply chain disruptions, and other geopolitical factors that have hurt revenue and increased costs, according to Chief Restructuring Officer Charles Moore.
To address its financial challenges, Accuride plans to pursue a post-petition transaction with an ad hoc group of its first-lien term loan lenders to invest in or purchase some or all of its assets under a Chapter 11 reorganization plan.
Another player in the auto parts market, Wheel Pros, which operates under the Hoonigan brand, filed for a prepackaged Chapter 11 bankruptcy on September 9.
This move aims to eliminate $1.2 billion in debt and secure approximately $570 million in new capital through an exit facility.
Under this restructuring plan, Wheel Pros has reached agreements with its equity sponsor, Clearlake Capital Group, and lenders, allowing first-lien claim holders to acquire 85% of the new equity interests, while 15% will go to new first-lien lenders backing the debtor’s exit term loan.
However, the latest company to enter bankruptcy is American Tire Distributors, a leading tire replacement company, which filed for Chapter 11 protection on October 22.
The firm is seeking to sell its assets while grappling with over $1.9 billion in funded debt. Based in Huntersville, N.C., the distributor operates 15 distribution centers and serves over 80,000 retail customers across North America.
The company filed its petition in the U.S. Bankruptcy Court for the District of Delaware, supported by a restructuring agreement with an ad hoc group of prepetition lenders.
Their petition indicates assets and liabilities ranging from $1 billion to $10 billion, which includes unsecured debts to major creditors like Goodyear Tire & Rubber Co., Continental Tire North America Inc., and Toyo Tire USA Corp.
American Tire Distributors is seeking $1.45 billion in debtor-in-possession financing from its prepetition lenders to sustain operations during the bankruptcy process.
This includes $250 million in new funds and access to $1.2 billion from its prepetition asset-based lending facility.
The company plans to auction all its assets with prepetition lenders acting as the stalking-horse bidder.
The company attributes its financial troubles to soaring inflation post-COVID-19 and a decline in demand for automotive products starting in 2022, following a tire boom that lasted from 2019 to 2021.
This boom led to an expansion of the business, but profits began to decline in 2022 and 2023 due to shifts in customer preferences toward cheaper tires, reduced consumer demand, rising operating costs, and a contraction in sales channels.
In May 2024, American Tire Distributors put itself up for sale and received a nonbinding letter of intent in June, which was later withdrawn on October 9.
Under the restructuring support agreement, prepetition lenders will participate as stalking-horse bidders in a Section 363 bankruptcy auction, credit bidding all amounts owed under the new money DIP claims and prepetition term loan claims.
Founded in 1935 in Lincolnton, N.C. as Heafner Tire, the company grew as a family-owned business until majority ownership was sold to private equity investors in 1999.
It rebranded to American Tire Distributors in 2002, supplying a variety of tire brands, including General, Uniroyal, BF Goodrich, and Michelin, among others.
In 2018, the company announced that Goodyear Tire & Rubber was no longer one of its distributors.
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Also Read: A Struggling Gas Station Chain Now Files An Unexpected Bankruptcy
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