October 19, 2018 – American Tire Distributors filed an amended Disclosure Statement in respect of its Joint Plan of Reorganization [Docket No. 191] and a blacklined version of that Disclosure Statement [Docket No. 190] reflecting changes from the version of October 15, 2018 [Docket No. 153]. In addition to the attachment of significant exhibits (listed below), the amended Disclosure Statement reflects the following significant developments:
- Support for the Plan amongst the Debtors’ “Consenting Term Loan Lenders” has risen to 78% from 67%,
- Estimated Recovery for holders of the Debtors’ Senior Subordinated Notes is expected to be 54.6%,
- Holders of the Debtors’ outstanding 838,551,089 shares are expected to recover $0.036 per share (splitting a $30 million pool),
- A committee of unsecure creditors has been appointed [Docket No. ], and
- Pursuant to the Valuation Analysis, the Reorganized Debtors will have an implied equity value at emergence of approximately $604 million at the midpoint.
The following exhibits were filed with the Disclosure Statement:
- Exhibit E – Liquidation Analysis.
- Exhibit F – Valuation Analysis.
- Exhibit G – Financial Projections.
According to the valuation analysis, “Based upon and subject to the review and analysis described herein, and subject to the assumptions, limitations and qualifications described herein, Moelis’ view, as of October 16, 2018, was that the estimated going concern enterprise value of the Reorganized Debtors, as of an assumed Effective Date for purposes of Moelis’ valuation analysis of December 31, 2018 (the ‘Assumed Effective Date’), would be in a range between $1,875 million and $2,125 million. The midpoint of our enterprise valuation range is $2,000 million. Based upon our range of estimated going concern enterprise value of the Reorganized Debtors of between $1,875 million and $2,125 million and assumed net debt of $1,396 million (assuming a debt balance of $1,431 million and a pro forma cash balance of $35 million as of December 31, 2018) as provided by the Debtors, the imputed estimate of the range of equity value for the Reorganized Debtors, as of the Assumed Effective Date, is between approximately $479 million and $729 million, with a midpoint estimate of $604 million.”
According to the financial projections, “ATD has projected a reduction of PLT unit sales from 35.7 million in 2018 to 34.2 million in 2019 in accounting for the trends noted above. These are partially offset by new business contribution of approximately 2.5 million units in 2019 growing to approximately 4.5 million units in 2020. The Financial Projections also include a 1% to 2% steady-state organic volume growth in its base unit sales which is consistent with historical patterns, and 2% to 3% average selling price inflation. Within its major channels, ATD has estimated growth from 2020 through 2023 at 0.5% to 1% for its core independent tire retailers, 1% to 2% for car dealers, 7% for e-commerce sales, and an increase of 30% in corporate accounts in 2020 from new business contributions, stabilizing at 2.5% from 2021 through 2023….The Financial Projections reflect the improvement of ATD’s year-end-days payable from 50 days at end of 2018 to 55 days by the end of 2019. Year-end-days payable remains constant at 55 days from end of 2019 through end of 2023. Prepetition accounts payable is assumed to be paid as part of ATD’s court-approved first day orders or upon emergence as part of the Plan….The Financial Projections assume capital spending of $60 million in 2019, increasing to $65 million in 2020 and remaining at this level through the end of the forecast period.”
The following is an updated summary of classes, claims, voting rights and projected recoveries:
- Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept the Plan and not entitled to vote. Estimated allowed claims are $500,000 and estimated recovery is 100%.
- Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept the Plan and not entitled to vote. Estimated allowed claims are $500,000 and estimated recovery is 100%.
- Class 3 (“ABL Claims”) is unimpaired, deemed to accept the Plan and not entitled to vote. Estimated allowed claims are $0 and estimated recovery is 100%.
- Class 4 (“Term Loan Claims”) is impaired and entitled to vote. Estimated allowed claims are $1,050,000,000 (in principal amount) and estimated recovery is 54.6%.
- Class 5 (“Senior Subordinated Notes Claims”) is impaired and entitled to vote. Estimated allowed claims are $695,000,000 (in principal amount) and estimated recovery is 100%.
- Class 6 (“General Unsecured Claims”) is unimpaired, deemed to accept the Plan and not entitled to vote. Estimated allowed claims are $616,144,244 and estimated recovery is 100%.
- Class 7 (“Intercompany Claims”) is unimpaired/Impaired deemed to accept/reject the Plan and not entitled to vote.
- Class 8 (“Section 510(b) Claims”) is impaired, deemed to reject the Plan and not entitled to vote. Estimated allowed claims are $0 and estimated recovery is 0%.
- Class 9 (“Intercompany Interests”) is unimpaired/Impaired, deemed to accept/reject the Plan and not entitled to vote.
- Class 10 (“Interests”) is impaired and entitled to vote. Estimated recovery is approximately $30 million in aggregate or $0.036 per share.
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