Briggs & Stratton’s plan to
sell most of the company to KPS Capital Partners moves to quickly and does not necessarily maximize the value of the company, a group of noteholders argue in a formal objection to the plan.
An attorney for the group, which owns some of the $195 million in notes set to mature in December that provided a catalyst to Briggs’ bankruptcy filing,
previewed the objection during a July hearing after the Wauwatosa-based small engine maker sought Chapter 11 protection in connection with a proposed sale to KPS, a New York-based private equity firm.
KPS agreed to buy most of Briggs’ assets for $550 million in cash and is also providing around 40% of $677 million in debtor-in-possession financing that allowed Briggs to continue operations after its filing.
A hearing is scheduled for next week to discuss bid procedures for the potential auction of Briggs.
The noteholders objection questions if that deal will maximize the value of Briggs and its subsidiaries.
“A plan of reorganization (and business rehabilitation) may be far better for all stakeholders,” the objection says, noting the agreement with KPS excludes retiree health and life insurance benefits, pension obligations and an undetermined amount of trade claims from before the bankruptcy filing.
“Similar to bondholders, other stakeholders such as pensioners, retirees, and certain trade creditors stand to receive very little, if anything, under the fast-tracked sale process,” the objection says.
Even if a reorganization of the company is not possible, the group argues that a single sale may not be the best way to maximize the value of the company.
“The Debtors appear to have several distinct business segments that could potentially be disaggregated and sold in discrete transactions. Selling the various business segments in separate transactions may realize optimal value in this instance,” the objection says.
Briggs itself had planned to sell most of its products business as recently as early March. The proceeds of the sale would potentially covered the $195 million in notes, allowing the company to avoid its current predicament. Selling the products business would have also allowed Briggs to focus on making engines and eliminated competition with some customers.
The objection also suggests a sale of some assets and a reorganization of the remaining business could also be an option.
“These potential alternatives merit full vetting by the Debtors, the (Creditors) Committee, and the market before the outcome of these cases is prematurely set through the proposed Bidding Procedures,” the objection says.
Under the timeline outlined in Briggs’ filings, the sale of the company could be approved by the court within seven-and-a-half weeks of the initial bankruptcy filing.
“Under any circumstances, this would be an aggressive timeline,” the objection says.
The group also argues that the proposed bid procedures “appear likely to chill bidding,” noting that KPS could potentially credit bid up to $265 million from its financing and the procedures would require a bidder to post at least a $57 million cash deposit less than three weeks after the bid procedures are set to be approved to participate.
