October 5, 2018 – American Tire Distributors (“ATD”) notified the Court that it had reached a settlement with holders of a majority of its term loans whereby those holders have agreed to support the restructuring support agreement announced by the Debtors on October 4, 2018 [Docket No. 128]. The settlement notes, “On October 5, 2018, the Debtors announced an agreement in principle (the “Settlement”) with holders of a majority of its term loans to support the existing restructuring support agreement. The Settlement has the support of all three categories of the Debtors’ debt holders, including approximately 75 percent of its bondholders.” The material terms of the Settlement are attached to the notice as Exhibit 1 (the ‘Summary Term Sheet’) and include the the following terms in tabular format:
FILO DIP Terms:
- Size: $250mm
- Interest Rate: L+875
- Fees: 3.25% Put Option Premium, 2% Closing Payment, 1% Exit Payment
- Security: FILO on ABL Priority Collateral, Priming Lien on Term Priority Collateral
FILO DIP Participating Parties:
- Sub Noteholders: 50% participation ($125mm)
- Existing Term Loans: 50% participation ($125mm)
Amendment / Extension of Existing Term Loan:
- Maturity extended at par to 9/1/24
- Additional guarantors (including Canadian entities) and collateral (including Canadian equity and assets)
- Junior Lien on Inventory
- Covenants to be tightened as agreed to limit actual, effective and structural subordination and collateral dilution
Terms of Exit Financing:
- $150mm ABL FILO tranch
- $100 mm of Additional Term Loans identical to Amended/Extended Existing Term Loans, under same loan agreement
FILO DIP Providers Required to Participate in Exit: Yes
Interest Rate on Exit Financing (Toggle at Company Option):
- Exit FILO: § Cash Only: L+600bps or § Cash of L+550bps and PIK of 100bps OR
- Exit Term Loan: Cash Only: L+750bps or § Cash of L+650bps and PIK of 150bps
Maturity:
- Exit FILO: 9/1/23
- Exit Term Loan: 9/1/24
Exit Term Loan Mandatory Prepayments:
- 1 year holiday
- 75% excess cash flow sweep thereafter
Call Protection:
- Exit FILO: None
- Amended Term Loan: 103 (Year 1), 101 (Year 2), Par (thereafter)
Other Economic Terms:
- All Existing Term Loan lenders receive 0.5% PIK amendment fee on Existing Term Loan paid at effective date of the plan
- Repayment of ABL / FILO through the return of vendor terms, to be capped at $140mm, will reduce secured debt capacity
In a press release announcing the Settlement, Stuart Schuette, Chief Executive Officer of ATD noted, “We are pleased to have the support of our term loan lenders for our previously announced restructuring support agreement, which will help to facilitate a fully consensual court-supervised process. The strong support by our key financial stakeholders for our recapitalization plan represents an important vote of confidence in our business and our future. We intend to move quickly through this court-supervised process and continue our ongoing transformation to lead change in our industry.”
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