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Bankers for American Tire Distributors Inc. are sounding out investors on a junk bond sale that would help the company refinance its debt more than two years after exiting bankruptcy, according to people with knowledge of the matter.
Goldman Sachs Group Inc. is leading talks for the roughly $1 billion deal, which is being discussed with a yield of about 8.5%, according to the people, who asked not to be identified discussing a private transaction. Talks are early and details could change, they said.
The company, one of the nation’s biggest independent sellers of replacement tires, has term loans due in 2023 and 2024 that trade around 97 and 98 cents on the dollar, respectively, according to Bloomberg data. They were issued to help American Tire exit bankruptcy and both are structured as payment-in-kind, which pay interest in additional debt rather than cash.
A representative for Goldman Sachs declined to comment, while American Tire didn’t immediately respond to requests for comment.
American Tire sought bankruptcy protection in 2018 after the manufacturers of Goodyear and Bridgestone tires decided to deal directly with consumers through their own networks. In what was an almost simultaneous blow, Sears Holdings Corp.’s auto centers agreed to install tires bought on Amazon.com.
The company emerged from Chapter 11 in late 2018, which cut its borrowings by $1.1 billion through a swap of debt claims for equity.
Moody’s Investors Service upgraded American Tire two notches to Caa1 in December, citing expectations for adequate liquidity, positive free cash flow and deleveraging. It generated about $4.8 billion of revenue for the 12 months ended Oct. 3, Moody’s said.
Huntersville, N.C.-based American Tire is a wholesale distributor of tires, custom wheels and other automotive tools. It operates more than 140 distribution centers in the U.S. and Canada.
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