The sale of most of Wauwatosa-based
Briggs & Stratton Corp. to New York-based private equity firm
KPS Capital Partners could close as soon as Monday or Tuesday.
Those days are the target for a closing of the $550 million deal, an attorney for KPS told a federal bankruptcy judge on Tuesday morning. Under the terms of a settlement agreement Briggs reached with its creditors, the deal would need to close by Sunday, Sept. 27 or the company’s sale out of bankruptcy could again be subject to objections.
Briggs and its advisors estimate that if the deal closes by Sept. 25, there could be around $40 million in proceeds available for unsecured creditors. Ronit Berkovich, a Briggs attorney, said at the start of the case she expected no recovery for unsecured creditors. On Tuesday, she said the potential recovery was the result of improving business performance, an ability to close sooner because of regulatory approvals and reaching a settlement with creditors.
A one-week delay from that date, however, would cut the proceeds down to $23 million and a delay to Nov. 6 would cut the proceeds down to $2 million, according to Briggs' forecasts.
“Ice cubes melt, this one is melting very fast. So the risk of not taking the deal in hand is substantial,” said Robert Stark, an attorney representing the official creditors committee.
Stark said he felt there was a case to be made in objecting to the sale, but the certainty of some recovery outweighed the potential of litigating the case and getting nothing. He also made a point of highlighting the potential for the case to reset if the closing does not take place by Sept. 27.
If the deal closes on schedule, unsecured creditors stand to recover 7% to 9% of their claims. The recovery was boosted by the Pension Benefit Guaranty Corp. agreeing to allow the first $5 million it would otherwise receive to go to other creditors. KPS also agreed to take on one of the existing Briggs retirement plans.
“You got the best result out of a sub-optimal situation,” Judge Barry Schermer said to Stark.
While the settlement addressed the concerns of the official creditors committee, some Briggs suppliers still had objections to how language in the potential sale order treated their liens and contracts. Schermer asked attorneys for Briggs and the suppliers to work together on language and submit it to him on Tuesday afternoon.
Briggs filed for bankruptcy in mid-July as the company faced mounting debt obligations, including around $195 million in notes set to mature in December. The company’s efforts to address those obligations were hampered by the COVID-19 pandemic, which hit the U.S. just after the company announced a plan to sell its products business to cover the debt.
As the company sought to obtain financing, its existing lenders gave the company a deadline in June and then July to find capital in exchange for relaxing other requirements.
Ultimately, Briggs entered Chapter 11 bankruptcy with an offer from KPS to buy nearly all of its assets and provide a portion of the financing the company needed to continue operating during the bankruptcy process.
Briggs’ creditors objected to the process the company proposed, arguing not enough had been done to maximize the potential value of the company. They also questioned the quick timeline Briggs sought for the company to go to auction and eventually be sold.
The process also drew an objection from Waukesha-based Generac Power Systems, a competitor and sometimes customer of Briggs, which expressed interest in bidding on at least part of the small engine maker.
However, it appears Generac was not among those that ultimately bid on any of Briggs’ assets. The auction for the company was ultimately cancelled after no qualified bids were received.
Advisors for Briggs did disclose Monday that the company received four bids for parts of the company. Those bids were for the Allmand, Billy Goat and standby power businesses, which collectively represent around 11% of fiscal 2020 sales.
The bids came from two strategic buyers originally contacted before the bankruptcy filing and a financial buyer that reached out after the bankruptcy filing. Generac, a potential strategic buyer, had said it was not contacted before the case was filed.
Two of the bids did not include a purchase agreement or deposit required by the court-approved bidding procedures, according to Briggs’ advisors. The bids were also for “substantially less” than the value of the KPS offer.
