Major automotive parts retailer AutoZone has entered business rescue, following a resolution passed by its board of directors on 1 July due to severe financial distress.
AutoZone has appointed Piers Michael Marsden and Jenna Lee Osborne from Matuson & Associates as its business rescue practitioners.
In a sworn statement accompanying the business rescue notice, AutoZone CEO Dion De Graaff detailed the company’s primary focus on the motor spares industry, specifically the aftermarket automotive parts and accessories sector, through both wholesale and retail channels.
De Graaff highlighted that AutoZone underwent a private equity transaction in 2014, which was financed with a manageable level of debt. Despite this, the company struggled to meet expectations due to the country’s challenging economic conditions.
“Efforts to improve performance were hampered by the Covid-19 pandemic, civil unrest, and a period of stagflation,” De Graaff explained. “During this time, AutoZone faced increasingly heavy debt service obligations. By 2021, it was evident that our operations were falling below break-even levels.”
To alleviate these financial pressures, AutoZone’s lender, Absa, offered quarterly debt service holidays. However, these measures were insufficient to restore the company’s financial stability.
“The debt facilities from Absa are due to mature on 30 June 2024. Unfortunately, with the sales process intended to recapitalize the business failing to result in a sale, the bank has declined to extend another extension,” De Graaff added.
Despite these challenges, De Graaff expressed optimism about AutoZone’s prospects for recovery. He emphasized the company’s strong brand presence in South Africa and its loyal customer base, which make it an attractive prospect for stakeholders in the automotive spares industry.
AutoZone operates approximately 190 outlets across the country and employs 1,452 people, with 25% being members of the Numsa trade union and 21% belonging to the Motor Industry Staff Association.
