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, Bloomberg News reported. Goldman Sachs Group Inc. is leading talks for the roughly $1 billion deal, which is being discussed with a yield of about 8.5%. The company, one of the nation’s biggest independent sellers of replacement tires, has term loans due 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. 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 twelve months ended Oct. 3, Moody’s said.
