Moody’s downgrades American Tire Distributors’ ratings

Moody’s Investors Service downgraded its ratings for American Tire Distributors, including the company’s Corporate Family Rating (to Caa2 from B3) and Probability of Default Rating (to Caa3-PD from B3-PD), and the ratings for the company’s senior secured term loan and senior subordinated notes (to Caa1 from B3 and to Caa3 from Caa2, respectively). The ratings outlook is stable. These actions conclude the review for downgrade initiated on April 17th, 2018 following the announcement that The Goodyear Tire and a U.S. subsidiary of Bridgestone Corporation are forming one of the largest tire distribution joint ventures in the United States.

“While the value proposition afforded by ATDI’s extensive distribution network and replacement tire assortment remains intact, we anticipate a material loss of business that will not be easily replaced,” said Inna Bodeck, Moody’s lead analyst covering the company. “All else being equal, the magnitude of the associated earnings and cash flow decline will compound an already levered financial risk profile, rendering a pre-emptive debt restructuring increasingly likely, in our estimation” added Bodeck.

Moody’s downgraded the following ratings for American Tire Distributors, Inc.:
– Corporate Family Rating, to Caa2 from B3
– Probability of Default Rating, to Caa3-PD from B3-PD
– Senior Secured Term Loan, to Caa1 (LGD2) from B3 (LGD3)
– Senior Subordinated Notes*, to Caa3 (LGD4) from Caa2 (LGD5)

Outlook Action:
Outlook, changed to Stable from Rating Under Review
* includes original issuance by ATD Finance Corp., which was later merged with and into American Tire Distributors, Inc.

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