American Tire Distributors – Files Joint Plan of Reorganization & Related Disclosure Statement

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October 15, 2018 – American Tire Distributors filed a Joint Plan of Reorganization [Docket No. 152] and related Disclosure Statement [Docket No. 153]; and scheduled a November 15, 2018 hearing to consider the Disclosure Statement, with objections due by November 12, 2018. 

The Disclosure Statement notes, “If the Plan is confirmed and consummated, Holders of Allowed Senior Subordinated Notes Claims and Allowed Interests will receive the New Equity and New Warrants, as applicable. The Holders of Allowed Senior Notes Claims and Allowed Interests will own approximately 95% and 5% of the New Equity, respectively, (in each case, subject to dilution on account of the Employee Incentive Plan, New Warrants, and other shares issued after the Effective Date not pursuant to the Plan)….The exercise price (‘Exercise Price’) for each share of New Equity issuable upon the exercise of the Warrants (the ‘Warrant Shares’) shall be equal to: 

(I) in the case of the first Tranche of Warrants (the ‘Tranche I Warrants’), the quotient of (i) the total equity value implied by a total enterprise value of the Issuer and its subsidiaries (‘TEV’) equal to $2,125,000,000 (with such total equity value determined as such TEV minus the consolidated net debt of the Issuer and its subsidiaries as of the Plan Effective Date), divided by (ii) the number of shares of New Equity issued under the Plan on the Plan Effective Date;  

(II) in the case of the second Tranche of Warrants (the ‘Tranche II Warrants’), the quotient of (i) the total equity value implied by a TEV equal to $2,500,000,000 (with such total equity value determined as such TEV minus the consolidated net debt of the Issuer and its subsidiaries as of the Plan Effective Date), divided by (ii) the number of shares of New Equity issued under the Plan on the Plan Effective Date; and 

(III) in the case of the third Tranche of Warrants (the ‘Tranche III Warrants’), the quotient of (i) the Tranche III Threshold, divided by (ii) the product of (A) the number of shares of New Equity issued under the Plan on the Plan Effective Date multiplied by (B) 0.95. The ‘Tranche III Threshold’ means, as of any date, an amount equal to the aggregate amount of principal and interest that would have been due and payable as of such date (exclusive of any redemption or other special premium) pursuant to the Notes if the Notes had continued to remain outstanding as of the Plan Effective Date in a principal amount equal to $1,050,000,000, which shall be calculated by increasing the Tranche III Threshold on each September 1 and March 1 following the Plan Effective Date through the date of exercise of the applicable Tranche III Warrant at an annual rate of deemed interest equal to 10.25% (on an initial principal amount of $1,050,000,000, which principal amount shall be reduced solely for purposes of calculating such deemed interest by the amount of any cash dividends paid in respect of the New Equity on or following the Plan Effective Date), excluding (for purposes of calculating such reduction) dividends that were paid to, or held for the benefit of, holders of Existing Equity Interests, the Warrant Shares and their respective transferees or on account of the Employee Incentive Plan.
 
The following is a summary of the classes, claims and voting rights: 
  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.  Each Holder of an Allowed Other Secured Claim shall receive, at the option of the Debtors and, if outside the ordinary course of business, with the consent of the Required Consenting Noteholders with respect to Allowed Other Secured Claims in excess of $1,250,000, either:  (a) payment in full in Cash; (b) Reinstatement of such Allowed Other Secured Claim pursuant to section 1124 of the Bankruptcy Code; (c) delivery of the collateral securing any such Other Secured Claim and payment of any interest required under section 506(b) of the Bankruptcy Code; or (d) such other treatment rendering such Allowed Other Secured Claim Unimpaired. 
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Each Holder of an Allowed Other Priority Claim shall receive, at the option of the Debtors and, if outside the ordinary course of business, with the consent of the Required Consenting Noteholders with respect to Other Priority Claims in excess of $1,250,000 (which consent shall not be unreasonably withheld), either:  (a) payment in full in Cash; (b) Reinstatement of such Allowed Other Priority Claim pursuant to section 1124 of the Bankruptcy Code; or (c) such other treatment rendering such Allowed Other Priority Claim Unimpaired. 
  • Class 3 (“ABL Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. On the Effective Date, the ABL Claims shall be Allowed as Secured Claims. On the Effective Date, each Holder of an Allowed ABL Claim shall receive, at the election of such Holder, either:  (a) Full Payment of such Allowed ABL Claim in Cash; or (b)(i) new loans under the Amended ABL Facility in an amount equal to the principal amount of loans under the ABL Facility held by such Holder as of the Effective Date, and (ii) Cash in an amount equal to the accrued but unpaid non-default interest payable to such Holder under the ABL Credit Agreement as of the Effective Date (if any). 
  • Class 4 (“Term Loan Claims”) is impaired and entitled to vote on the Plan. On the Effective Date, the Term Loan Claims shall be Allowed in the aggregate principal amount of $695,000,000, plus accrued and unpaid interest on such principal amount through the Petition Date and any other amounts due and owing pursuant to the Term Loan Credit Agreement through an including the Effective Date. 
  • Class 5  (“Senior Subordinated Notes Claims”) is impaired and entitled to vote on the Plan. Each Noteholder shall receive its Pro Rata Share of the Noteholder Equity Recovery. 
  • Class 6 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.  Each Holder of an Allowed General Unsecured Claim shall receive either: (a) Reinstatement of such Allowed General Unsecured Claim pursuant to section 1124 of the Bankruptcy Code; or (b) payment in full in Cash on (i) the Effective Date, or (ii) the date due in the ordinary course of business in accordance with the terms and conditions of the particular transaction giving rise to such Allowed General Unsecured Claim. 
  • Class 7 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Intercompany Claims shall be, at the option of Reorganized ATD, either: (a) Reinstated; or (b) cancelled and released without any distribution on account of such Claims. 
  • Class 8 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Section 510(b) Claims shall be discharged, cancelled, released and extinguished without any distribution and Holders of Class 8 Section 510(b) Claims shall receive no recovery. 
  • Class 9 (“Intercompany Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Intercompany Interests shall be, at the option of Reorganized ATD, either: (a) Reinstated; or (b) cancelled and released without any distribution on account of such Interests. 
  • Class 10 (“Allowed Interests”) is impaired and entitled to vote on the Plan. Each Holder of an Allowed Interest shall receive its Pro Rata Share of: (a) the Equity Recovery, subject to dilution by the Employee Incentive Plan and the New Warrants; and (b) the New Warrants. In addition, on the Effective Date, the Debtors or the Reorganized Debtors, as applicable, shall pay in full in Cash all Sponsor Fees and Expenses and TPG Field Operations Fees, as applicable.    

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