American Tire to sell $805 million seven-year subordinated notes

By Paul Deckelman

New York, Feb. 3 – American Tire Distributors, Inc. plans to sell $805 million of senior subordinated notes due 2022, the company announced in a news release on Tuesday.

There was no immediate information available as to the timing of the offering or investment banks that might be involved, although BofA Merrill Lynch acted as lead arranger on American Tire’s recent bank financing.

The bond deal proceeds will be used to fund the redemption of all of the company’s outstanding 11½% senior subordinated notes due 2018. The Huntersville, N.C.-based independent supplier of tires to the North American replacement tire market announced on Jan. 23 that it had called all $425 million of those outstanding notes for redemption at 102 on Feb. 11.

A portion of the proceeds will also be used to pay a cash dividend to American Tire’s parent company, American Tire Distributors Holdings, Inc., to enable American Tire’s ultimate parent to fund a cash dividend or other payment to certain of its security holders.

The bond offering has not been registered with the Securities and Exchange Commission and will instead take place under Rule 144A and Regulation S.

Last month, American Tire completed a $140 million incremental term loan financing due 2018 with BofA Merrill Lynch as the lead arranger; that loan priced at 475 basis points over Libor, with a step-down to Libor plus 450 bps should the company bring total net leverage down to 4 times. The loan also has a 1% Libor floor, has 101 hard call protection until March 28 and was issued at an original issue discount of 98¼.

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