FS, Bain, KKR BDCs hold first lien debt in bankrupt American Tire

The Apollo BDC, which owns equity in the company, shed its subordinated debt positions in the second quarter, as did the New Mountain BDC.

Ares Management- and TPG Capital-backed American Tire Distributors has filed for Chapter 11 bankruptcy, affecting the portfolios of some of the largest business development companies.

The North Carolina-based tire distributor sought court protection the loss of several key customers and online shopping took their toll. Goodyear Tire & Rubber Company and Bridgestone Americas both severed ties with American Tire, while a partnership between Amazon and Sears further cut into the debtor’s business, according to bankruptcy court papers.

The company counts six BDCs – American Capital Floating Senior, Corporate Capital Trust, Corporate Capital Trust II, Bain Capital Specialty Finance, FS Investment Corporation and FS Investment Corporation II – among its lenders, according to Refinitiv BDC Collateral.

Together, they hold $21.43 million in first lien debt. All have either marked their positions at 65 cents or 66 cents on the dollar.

New Mountain Finance Corporation and Apollo Investment Corporation previously held $25.26 million of subordinated debt in the firm, but both exited their positions in the second quarter, BDC Collateral showed.

Apollo’s BDC also owns equity in the company.

Representatives for Ares, Bain, Apollo, FS Investments, KKR and TPG could not be reached for comment.

The company has sought approval for a $1.23 billion debtor-in-possession financing package, to which Goldman Sachs Lending Partners is party, according to court documents. Part of the loan arrangement includes $250 million in fresh capital.

American Tire’s $1.1 billion debt-cutting plan centres on the conversion of the senior subordinated noteholders’ claims to 95 percent of the reorganised company’s equity, with Ares, TPG and other shareholders receiving the other 5 percent.

Term loan lenders will receive post-reorganisation term loans similar to the prepetition debt, though the maturity date will be extended three years from September 2021 to September 2024.

TPG acquired the American Tire from Berkshire Partners, Investcorp and Greenbriar Equity Group, for a $1.3 billion, according to a Refinitiv LoanConnector term sheet from the 2010 transaction. The deal gave TPG 93 percent of American Tire’s equity, though Ares and its co-investors then acquired 46 percent of the equity in February 2015, bankruptcy court papers showed.