American Tire volumes show recovery momentum, 2Q20 EBITDA rises due to cost savings

American Tire Distributors managed to drive toward some recovery momentum by the end of 2Q20, due to a rebound in driving activity nationwide after COVID-19 closures were lifted in some parts of the US, according to two sources familiar with the matter. 

At the outset of the quarter, volumes were tracking a 50% year-over-year decline rate, but the company was able to post USD 1.1bn in net revenue for the full quarter, which was down just 4% from the prior year, the sources continued. 

Meanwhile, adjusted EBITDA rose 23% year-over-year to USD 64.2m due to the company’s cost saving initiatives. The year-over-year rise was attributed to adjustments of USD 3.7m in COVID-19 related charges, USD 4.86m in business transformation costs and USD 1.45m in stock-based compensation, the sources noted. 

Adjusted EBITDA for the six months ended 4 July totaled USD 71.629m, compared to USD 70.47m last year, the sources said. This includes adjustments of USD 7.17m in COVID-19 related charges, USD 7.108m of impairment of long-lived assets and USD 8.905m of business transformation costs. 

As of 4 July, liquidity grew to USD 136m through USD 18.1m of cash, USD 75.9m of US ABL availability and USD 42m of Canadian ABL availability. Pro forma leverage totaled 8.3x during the same period, one of the sources added. 

In 2018, the company filed for Chapter 11 protection after losing major contracts from Goodyear Tire and Bridgestone. While the company replaced more than half of those contract volumes in 2019, the company has not fully replaced that business, according to a March 2020 Standard & Poor’s report

According to ATD’s plan of reorganization, the company handed over its equity to noteholders while paying unsecured creditors in full. 

The USD 795m Libor+ 750bps first lien term loan due 2024 initially rose three points to the 83/86.5 context on 13 August after earnings from the 80/82.4 context on 11 August, according to Markit. The loan has since settled to 82.6/86 today. 

In turn, the fairly illiquid USD 150m L+ 600bps exit FILO term loan due 2023 fell to the 90.5/93.5 context today from trades at 94.667/96.5 on 11 August, according to Markit. 

American Tire did not respond to a request for comment. 

2020 Debtwire

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