Despite objections from several corners, a Missouri bankruptcy court judge on Tuesday approved bid procedures and debtor-in-possession financing for Wauwatosa-based Briggs & Stratton Corp.
Those interested in bidding on the small engine maker will have until Aug. 28 to submit bids for all or parts of the company with an auction taking place Sept. 1 and a sale hearing on Sept. 15.
Briggs filed for Chapter 11 bankruptcy in mid-July after securing a $667 million financing package and a $550 million offer from New York-based KPS Capital Partners to buy nearly all of the company’s assets. The offer called for KPS to be the stalking horse bidder in the court-supervised sale process.
The official committee of unsecured creditors, an ad hoc group of note holders and Waukesha-based Generac all objected to elements of the bid procedures. Their objections centered on the timeline Briggs laid out, arguing the accelerated timeline would not generate interest from other bidders. Generac, specifically, took issue with the treatment of partial bids.
Attorneys for the creditors also questioned whether Briggs and its advisors had done enough to market the company for sale prior to the bankruptcy filing. They noted that just a handful of potential strategic buyers – including Kohler Co. and Toro – were contacted prior to the bankruptcy.
Generac said it is interested in submitting a bid but was not involved until after the bankruptcy case started. Attorneys for the company said more time to submit bids would increase the chances or quality of Generac’s potential bid.
“This is not six laundromats. This is Briggs and Stratton we’re talking about,” said Robert Stark, an attorney for the creditors committee, highlighting the company’s global operations and valuable intellectual property as reasons it would be difficult to put an offer together quickly.
Experts for Briggs said that it focused on buyers already in the lawn and garden space for strategic buyers and the financial buyers were limited by the amount of capital the company needed for its operations to continue.
“It had substantial leverage and needed a solution,” said William Peluchiwski, a senior managing director at Houlihan Lokey Capital, the investment banker for Briggs. He noted the company had a debt-to-EBITDA ratio of 14-times at the end of 2019 and around 20-times in the midst of the COVID-19 pandemic this spring.
Judge Barry Schermer said the process wasn’t without flaws, but also highlighted that Briggs started the marketing process back in early March when the company said it was looking to sell certain product lines.
“Everyone can second guess a process, everyone can do better on Monday morning than they did on Sunday afternoon,” Schermer said.
Ronit Berkovich, an attorney for Briggs, said the company had gone through a robust process that would lead to competitive bids.
“A longer process is unlikely to lead to higher or better bids,” she said. “This process will enable the market to determine the value of the company.”
Briggs has seen business pick up since its bankruptcy filing, but Berkovich said the company is also burning through around $10 million in cash per week as it rebuilds inventory after depleting it with improved sales.
She said altering the bid procedures and milestones would have cost the company its financing, which will help it rebuild inventory, along with potentially allowing KPS to walk away from the acquisition.
“It’s a really great risk to give up this bird in hand,” she said.