Late last week, in a filing with the Securities & Exchange Commission, Briggs & Stratton said that if it was unsuccessful in getting additional time from its lenders concerning a $6.7 million debt interest payment, “the Company would likely need to seek relief in bankruptcy proceedings.”
That possibility became a reality three days later, as Briggs & Stratton announced it has filed petitions for a court- supervised voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code and entered into a definitive agreement with KPS Capital Partners “for a sale of substantially all of the Company’s assets and assume certain customer, employee and vendor liabilities.”
Under the terms of the agreement, an affiliate of KPS formed for purposes of this transaction will act as the stalking-horse bidder through a court-supervised sale process (known as a Section 363 process). Among other things, the sale agreement is subject to higher or better bids from other potential purchasers.
Briggs & Stratton said it has also obtained $677.5 million in debtor-in-possession (DIP) financing, with $265 million committed by KPS and the remaining $412.5 from the company’s existing group of asset-based lender banks. Following court approval, Briggs said the DIP facility will ensure that the company has sufficient liquidity to continue normal operations and to meet its financial obligations during the Chapter 11 process, including the timely payment of employee wages and health benefits, continued servicing of customer orders and shipments, and other obligations.
The company said the process will allow it to ensure the viability of its business while providing sufficient liquidity to fully support operations through the closing of the transaction. Briggs & Stratton 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 Briggs & Stratton’s international subsidiaries.
“Over the past several months, we have explored multiple options with our advisors to strengthen our financial position and flexibility,” said Todd Teske, Briggs & Stratton’s chairman, president, and chief executive officer. “The challenges we have faced during the COVID-19 pandemic have made reorganization the difficult but necessary and appropriate path forward to secure our business. It also gives us support to execute on our strategic plans to bring greater value to our customers and channel partners. Throughout this process, Briggs & Stratton products will continue to be produced, distributed, sold and fully backed by our dedicated team.”
“Open For Business”
In a letter sent to customers, Teske said that “Over the past several months, we explored multiple avenues with our advisors to address our capital structure and strengthen our balance sheet. We concluded that a reorganization, facilitated through a voluntary filing of Chapter 11 bankruptcy, is the most effective and orderly way to address our stakeholders’ concerns and be better positioned for the future.’
Teske’s letter added:
“We’re open for business: This filing will have no impact on our international business lines, foreign or domestic.
“It’s business as usual: We will maintain normal business operations through the process, and we remain focused and well positioned to serve our customers and end users globally with innovative products and solutions that enable them to get work done better. Our products will continue to be produced, distributed, sold, serviced and fully backed.
“We have sufficient funding for ongoing operations: We have received commitments for $677.5 million in new debtor-in-possession (DIP) financing. Subject to court approval, we expect this financing will support our operations – and meet our obligations to suppliers – during this process.”
Teske added, ” We have a proud past and a bright future, with our foundational expertise in applying power. Our portfolio of innovative engines, robust lines of products, and high-performance commercial batteries positions Briggs & Stratton to meet our global customers’ needs for power to get work done, now and in the future.”
Earlier this year, Briggs & Stratton announced its “strategic repositioning,” through which the company would create a simpler organization through divestitures of the majority of the businesses within the company’s Products Segment.
The company said priority was being placed on divesting the turf products business headquartered in the U.S., and the pressure washer and portable generator product lines. The turf products business headquartered in the U.S. includes lawn and garden and turf care equipment sold under the Ferris, Billy Goat, Simplicity, Snapper and Snapper Pro brands.
Briggs said the repositioning would enable it to focus its businesses with expected annual sales of approximately $1.0 billion in the design, production and sale of residential and commercial engines, Vanguard commercial battery systems and standby power generation systems.
To date, the company has announced no sales of the assets it is seeking to divest. In its last two fiscal years, the company lost $54.1 million (2019) and $11.3 million (2018). In its most recent third quarter that ended March 29, Briggs & Stratton reported an 18% drop in sales from the previous year and a net loss of $145 million, or $3.47 a share, for the quarter compared with net income of $8 million, or 19 cents a share, for the same period in its 2019 fiscal year. The net loss included roughly $134 million in non-cash charges.