(Bloomberg) – Another icon of the postwar American suburbs went bankrupt when Briggs & Stratton Corp. filed for bankruptcy, brought down by weak sales, too much debt and a final push on the brink of the coronavirus pandemic.
The world’s largest maker of gasoline engines for outdoor power equipment on Monday sought creditors’ protection in a St. Louis bankruptcy court, citing debts of more than $ 1 billion. The presentation included a $ 550 million offer to the company from KPS Capital Partners, a New York-based private equity firm, which promised to keep Briggs & Stratton in business without the crushing debt that plagued the century-old company.
KPS, whose portfolio includes TaylorMade golf clubs and Life Fitness gym equipment, specializes in manufacturing companies. She has agreed to serve as the highest bidder in a court-supervised auction, setting a minimum price for any eventual sale, and is contributing to a bankruptcy loan that will keep Briggs & Stratton operating, according to a statement. KPS said it has already negotiated a new contract with United Steelworkers of America.
If you’ve ever pushed or driven a lawn mower in your backyard or held a snow plow, chances are the engine was made by Briggs & Stratton, which supplied brands like Craftsman and Snapper.
If you hired a landscaping service instead, some of their equipment probably also had Briggs & Stratton components; sold products to Deere & Co., MTD Products Inc. and Husqvarna Outdoor Products Group. The Wisconsin-based company’s product line also includes power generators and pressure washers, manufactured by 5,200 employees late last year. It employed more than 9,000 in 2005.
The company has been pressured by falling sales, linked in part to the pricing power of massive merchants like Home Depot, Lowe’s and Walmart, according to regulatory documents. It did not help that Sears Holdings Corp., which accounted for a large portion of sales, filed for bankruptcy in 2018. Briggs & Stratton said it also faces competition from major rivals such as Honda Motor Co. and Kawasaki Heavy Industries Ltd.
In addition to that, the Briggs & Stratton press release on the bankruptcy cited the pressures of the Covid-19 pandemic, which “have made reorganization the difficult but necessary and appropriate way to secure our business.”
The company, led since 2010 by CEO Todd Teske, is heading for a third straight annual loss, and the shares, which topped $ 40 in 2004, have sold for less than 80 cents.
Trading stopped on Monday as the news spread, but at $ 550 million, KPS’s offer would not be enough to cover all outstanding obligations, meaning shareholders could be eliminated. The company’s junior bonds would have to be paid before shareholders got anything, and those notes were recently trading at around 10 cents on the dollar, a sign that a full refund is unlikely.
Planned acquisitions
“KPS intends to grow the new Briggs & Stratton aggressively through strategic acquisitions,” said Michael Psaros, co-founder and managing partner of KPS, in a statement. “The new Briggs & Stratton will be conservatively capitalized and will not be taxed by the significant obligations of its predecessor.”
The KPS offer would need court approval and could still be outbid by a rival bidder for the company, which is based in Wauwatosa, less than 10 miles from downtown Milwaukee.
Briggs & Stratton said in its statement that it raised $ 677.5 million in debtor-in-possession financing that will help finance operations during the reorganization of the court. KPS said it is contributing $ 265 million of that sum.
Banks including Wells Fargo & Co., Bank of America Corp., BMO Harris Bank and PNC Business Credit will provide exit financing for a new company created by acquiring the assets of Briggs & Stratton, according to a KPS spokesperson.
Briggs & Stratton started as an informal association in 1908, initially focused on auto parts under founders Stephen F. Briggs and Harold M. Stratton, according to the company’s website. (“Briggs was the inventor and Stratton was the investor,” the company said.) They ventured into areas like motorized bicycles, electric refrigerators, and coin-operated paper towel vending machines, and their company flourished alongside single-dotted American suburbs – family homes and grassy courtyards.
Global reach
New York-based KPS manages KPS special situations funds with more than $ 11.4 billion of assets. The firm said its portfolio companies manage 150 manufacturing facilities in 26 countries with approximately 23,000 employees.
Kirkland & Ellis is legal advisor to KPS. Briggs & Stratton previously hired Houlihan Lokey Inc. to advise on strategic options, including refinancing your debt, selling assets, and reducing costs.
The case is Briggs & Stratton Corporation, 20-43597, United States Bankruptcy Court, Eastern District of Missouri (St. Louis).
(Updates with additional details on exit financing in the 13th paragraph)
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