Briggs & Stratton (B&S) one of the largest producers of gasoline engines for outdoor power equipment, and a manufacturer of power generation, pressure washer, lawn and garden, turf care and job site products, has filed Chapter 11 Bankruptcy.
The company has obtained $677.5 million in financing, with $265 million committed by KPS and the remaining $412.5 from the company’s existing group of lenders.
B&S also announced it has entered into a definitive stock and asset purchase agreement with KPS Capital Partners. Under the terms of the agreement, an affiliate of KPS formed for purposes of this transaction has agreed to acquire substantially all the company’s assets and assume certain customer, employee and vendor liabilities.
Among other things, the sale agreement is subject to higher or better bids from other potential purchasers.
According to a B&S announcement, “This process will allow the company to ensure the viability of its business while providing sufficient liquidity to fully support operations through the closing of the transaction. B&S believes this process will benefit its employees, customers, channel partners, and suppliers, and best positions the Company for long-term success. This filing does not include any of B&S’s international subsidiaries.”
Todd Teske, B&S Chairman, President, and Chief Executive Officer said the move gives the company support to execute on its strategic plans. “Throughout this process,” he said, “B&S products will continue to be produced, distributed, sold and fully backed by our dedicated team.”
On Aug. 11, 2020, B&S’s largest unsecured creditors asked to delay the company’s fast-track plan to sell its assets at auction. The creditors say a business reorganization could result in a better financial outcome for the company’s trade creditors, retiree health plan and pensioners.
According to the unsecured creditors report, “the company proposes an auction process with an Aug. 28 bid deadline and a Sept. 11 hearing on the sale. That would complete the Chapter 11 process within 7.5 weeks of B&S’s bankruptcy filing and allegedly give an unfair advantage to bidder KPS Capital Partners,” said attorneys representing the holders of $195 million in senior unsecured notes.
The note holders suggest that selling B&Ss’ “several distinct businesses” separately rather than as a whole “may realize optimal value.” Another possibility would be a combination of selling some non-core assets and reorganizing the company’s core business, the note holders said.
Also on the Aug. 11, Generac Power Systems, a leading manufacturer of home generators and potential bidder for all or part of B&Ss’ assets, objected to the B&S’s bidding procedures motion; arguing that the procedures, and the B&S’s handling of the sales process more generally, have effectively eliminated the opportunity for any meaningfully competitive sales process.
Urging the Court to address what they summarize as procedures/process that are not merely “bid chilling” but raise to the level of impossibility for any potential bidder to evaluate or make a bid for any portion of the business assets. Generac requests that the bidding procedures be redrafted to allow for partial bids and that “unreasonably expedited deadlines” be extended. Failure to do so, Generac argues, is simply playing into the hands of private equity stalking horse KPS Capital Partners, LP and the stalking horse’s efforts to “stifle” competitive bidding.
The bankruptcy reorganization could be the end of B&S especially if the Court allows bidding for parts of the company’s assets. The ultimate benefactors to the bankruptcy will be other producers of engines for outdoor power equipment industry.
Expect PSR to keep you up-to-date on current events, production forecasts and long term trends in the engine and outdoor power equipment industry. PSR
Michael Aistrup is Senior Analyst at Power Systems Research
