Small-engine maker Briggs & Stratton Corp., founded in Milwaukee in 1908 by an inventor and investor, filed for bankruptcy Monday.
Briggs filed for Chapter 11 in the United States Bankruptcy Court for the Eastern District of Missouri. Under Chapter 11, a company and its creditors develop a reorganization plan that allows the business to continue operating.
Briggs was the world’s largest manufacturer of small gasoline engines. It has sold more than 125 million engines. At one point, it employed about 11,000 people in the Milwaukee area.
As part of the bankruptcy filing, KPS Capital Partners LP, a private equity firm, through a newly formed subsidiary, has signed an asset purchase agreement with Briggs to purchase all of the company’s assets for approximately $ 550 million. .
The so-called stalking horse offer sets a minimum price for the company’s assets.
Briggs hopes to sell its assets under the supervision of bankruptcy courts, according to a KPS Capital press release.
The first agreed to provide $ 265 million to finance Briggs’ operations during the bankruptcy process.
KPS also said it has signed an agreement in principle with United Steelworkers of America for a new collective bargaining agreement for Briggs hourly employees represented by the union at the company’s Wauwatosa plant. The agreement would take effect upon completion of the acquisition and reorganization.
“KPS is committed to the expedited acquisition of Briggs & Stratton to provide certainty of results and confidence in the future of the new company for all of its stakeholders, including customers, employees and suppliers,” Michael Psaros, Co-Founder and Co-Founder of KPS he said in a statement.
“The Company and its stakeholders will benefit from KPS’s demonstrated commitment to manufacturing excellence, continuous improvement, global network, access to capital and significant financial resources,” the statement said. “The new Briggs & Stratton will be conservatively capitalized and will not be taxed by the significant obligations of its predecessor.
“We thank United Steelworkers of America for their support of our acquisition of the company,” Psaros said in the statement.
Briggs & Stratton joins other large companies, many of them in the retail and energy sectors, which have filed for bankruptcy in recent months.
The Wauwatosa-based company had revenues of $ 1.8 billion and employed an average of 5,251 people across the company in the fiscal year ended June 30, 2019. It has 1,363 employees in the Milwaukee area, as well as several hundred contract employees working in production.
Briggs was losing money and burdened with large debts when the economic recession caused by the coronavirus pandemic hit.
Its sales fell $ 107 million, or 18%, to $ 474 million in its third quarter ended March 29 compared to the same period last year. And the decline in sales is likely to be much worse in the quarter that ended in June. 30)
Briggs also reported a net loss of $ 145 million for the quarter, although approximately $ 134 million was non-cash charges to reflect the lower value of assets on its balance sheet.
The company also warned that its losses, the coronavirus crisis, and outstanding debt payments raised substantial questions about its ability to continue as a going concern.
The company lost $ 54.1 million in its fiscal year 2019 and $ 11.3 million in its fiscal year 2018.
Briggs manufactures small motors, residential and commercial lawn and garden equipment, portable generators, pressure washers, snowplows, and other outdoor power equipment. The company’s products are sold in more than 100 countries under brands such as Briggs & Stratton, Victa, Simplicity, Ferris, Billy Goat, Vanguard, Branco and Allmand.
It also sells engines to other manufacturers, including Deere & Co., Toro Co., and Viking.
Briggs has plants in Wauwatosa, Alabama, Georgia, Missouri, and New York, as well as Australia and China.
The company had short-term debt of $ 597.5 million and long-term debt of $ 7 million as of March 31.
His short-term debt includes $ 195.5 million in bonds maturing in December. That debt had to be refinanced before September 15, or the company would violate its loan agreements with a consortium of banks, allowing them to demand immediate repayment.
The company had planned to do so by selling some businesses.
“They locked themselves in a corner,” said Tom Hayes, an analyst at Northcoast Research.
In March, Briggs announced plans to sell its commercial turf products business, which is sold under brands like Ferris, Billy Goat, Simplicity and Snapper, and its product lines for power washers and portable generators.
The smaller company would focus on motors for outdoor residential power equipment, commercial motors, standby power generation, and commercial battery systems.
In June, after losing an interest payment of $ 6.7 million, the company’s board of directors voted to award executives and other key employees $ 5 million in cash retention awards, including $ 1.2 million for Todd Teske, president. , President and CEO, and $ 600,000 for Mark Schwertfeger, Senior Vice President, President and Chief Financial Officer.
The awards went in place of the annual bonus and long-term incentive compensation for fiscal year 2020, the company said in a document filed with the U.S. Securities and Exchange Commission.
Such awards are often awarded before a company files for bankruptcy.
Briggs has more than half of the market for motors for outdoor residential power equipment and established brands. It also has a large distribution network and profitable business in the sale of parts.
But the company has also faced a flat market for residential outdoor power equipment, excess manufacturing capacity, pressure from large retailers to limit price increases, and a growing preference for battery-powered outdoor equipment.
The company was founded in 1908 by Stephen Briggs, an inventor, and Harold Stratton, an investor, and was incorporated in 1910. Initially, it grew by manufacturing parts for the burgeoning automotive industry: starter switches were an early core product, small engines for such revolutionary products as washing machines, as well as garden tractors, cultivators and generators.
In 1953, he introduced the first lightweight aluminum motor that found a ready-made market for lawn mowers just as Americans flocked to the suburbs. The company produced more than 2 million engines a year on average during the 1950s.
Briggs had four manufacturing plants in the Milwaukee area at the same time. But the company, which was hit by increased foreign competition in the 1980s, also had a history of conflict with unions and, over the decades, moved much of its manufacturing to other states.
The company also has a history of opening and closing plants in Wisconsin, Missouri, Kentucky, Tennessee, Alabama, and elsewhere.
Briggs closed its Port Washington plant in 2008 and its Jefferson and Watertown plants in 2009.
In 2007, it closed its engine plant in Rolla, Missouri, which once employed up to 800 people, moving much of that production to China. In 2012, she announced the closure of a plant in Newbern, Tennessee, resulting in the loss of nearly 700 jobs. It also closed its plant in the Czech Republic that year.
And in August, it announced that it would close its plant in Murray, Ky.
The company has not had a consistent path in recent years, said Hayes, an analyst at Northcoast Research.
“It was, ‘Let me turn this dial and turn that dial,'” he said.
