The automotive industry has suffered its share of bankruptcies this year with the most notable victim being electric vehicle maker Fisker Group, which filed Chapter 11 bankruptcy on June 18.
Fisker blamed various market and macroeconomic headwinds for causing its financial distress that led to its bankruptcy.
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The EV industry has been hit pretty hard outside the U.S., as 20 German EV auto parts manufacturers filed for bankruptcy in the first half of 2024, DigiTimes reported.
Auto parts companies are also having financial distress in the U.S. as well. PartsID, which operates an e-commerce auto parts retail business, filed for Chapter 11 in December 2023.
The company sells auto parts to consumers online through various websites, such as TruckID.com, CardID.com and CamperID.com.
Wheel Pros, which operates as auto parts distributor and retailer Hoonigan, filed for a prepackaged Chapter 11 bankruptcy on Sept. 9 that would eliminate $1.2 billion in debt and provide about $570 million in new capital through an exit facility, according to a company statement.
Image source: Pixabay.
Wheel Pros files prepack Chapter 11 bankruptcy
Under the restructuring support agreement and prepackaged bankruptcy filed in the U.S. Bankruptcy Court for the District of Delaware, Wheel Pros reached agreements with its equity sponsor Clearlake Capital Group and lenders for a consensual restructuring that will hand 85% of its new equity interests to holders of first lien claims and the remaining 15% to new first-lien lenders who will backstop the debtor's exit term loan.
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Under the prepack bankruptcy, the debtor will seek approval of a $110 million debtor-in-possession financing term loan and a $175 million asset-based loan DIP facility to allow the debtor to operate through its bankruptcy proceedings.
The company expects to operate in an ordinary course of business during bankruptcy. The company's operations outside of North America are not part of the bankruptcy process.
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"Today's announcement marks an important step forward for Hoonigan that will enable us to advance our industry-leading position in the growing automotive aftermarket sector," said Vance Johnston CEO of Hoonigan. "With a significantly strengthened balance sheet and new capital, this transaction will position us to invest in innovation and further drive financial performance. With strong support of our financial partners, we remain laser-focused on providing cutting-edge products and best-in-class service to our partners throughout the process."
The debtor said its economic downturn occurred after having tremendous growth during the Covid-19 pandemic, followed by a decline in demand in late 2021. The company's revenue grew from $844 million in 2019 to $1.5 billion in 2022.
After Covid, high interest rates and inflation resulted in weaker consumer demand, the debtor expected the demand to return by late 2023, but inflation and high interest rates continued to depress demand.
Wheel Pros LLC and 26 affiliates listed $1 billion to $10 billion in assets and liabilities in their petition. The debtor's largest unsecured creditors include Wilmington Trust NA, owed $92.6 million; Nitto Tire, owed $18 million; and Sinolion International Trading Co., owed $10.7 million.
The debtor was founded in 1994 as Wheel Pros and now operates as Hooningan to design, market, sell and distribute aftermarket automotive wheels, performance tires, and related accessories to over 30,000 retailers, warehouse distributors, and specialty builders through a global network of over 42 distribution centers.
Clearlake Capital acquired the company in April 2018, which was followed by a series of acquisitions by the company shortly afterward. In June 2018, the company purchased Amcor Industries, which does business as Gorilla Automotive Products.
That purchase was followed by ReadyLift Suspension (October 2018,) MHT Luxury Wheels (May 2019,) Mobile Hi-Tech (August 2019,) Zbroz Racing (April 2020,) Just Wheels and Tires (December 2020.) Hoonigan was purchased in September 2021.
The debtor on Sept. 8 signed an asset purchase agreement to divest its interest in its 4 Wheel Parts retail stores.
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