Wauwatosa-based
Briggs & Stratton’s bankruptcy plans face new challenges this week as the U.S. Trustee’s office and the official committee of unsecured creditors raised objections.
Briggs
filed for Chapter 11 bankruptcy on July 20, seeking approval for $667 million in debtor-in-possession financing. The financing package included funding from New York-based private equity firm KPS Capital Partners, which also agreed to buy most of the company for $550 million. The plan calls for KPS to serve as the stalking horse bidder in a court-supervised sale process.
The plan already received objections from an ad hoc group of noteholders who likely would recover little or none of their money if Briggs ultimately sells for $550 million. The roughly $195 million in notes the group holds part of is what served as a catalyst for Briggs ending up in bankruptcy court.
Those notes were set to mature in December, but Briggs also had an asset-based lending facility that had a springing maturity in it if the notes were still outstanding in December. As Briggs sought flexibility to find additional capital, its lenders gave the company June 15 and then July 15 and 19 deadlines in exchange for relaxing some covenants.
“At the top of the capital stack is the prepetition ABL Facility, which, as of the petition date, had an outstanding principal amount of approximately $326 million,” the creditors committee says in its objection. “The ABL Lenders want out of this investment and have used their unique position as senior secured lenders, with purported senior liens on substantially all of the debtors’ assets, to advance a case agenda that would accomplish that goal, no matter the cost to the estates and creditors further down the capital structure.”
The process laid out in Briggs’ court filings would not maximize the value of the company or other alternatives, including the sale of parts of the company or a restructuring, should be considered, those objecting to the process argue.
Waukesha-based Generac Power Systems, both a competitor and customer of Briggs, also objected to the sale process. Generac says it is
interested in buying parts of Briggs but has not been given full access to due diligence documents. The company also argues the procedures make it difficult to make a qualifying bid for parts of the company.
Generac also indicated in its objection that it was not contacted about acquiring parts of Briggs prior to the bankruptcy filing, a fact that the ad hoc group and the unsecured creditors committee seized on in their objections. The creditors committee described Generac as “a natural party to contact.”
“Based on its initial review of the marketing efforts, the committee has serious questions regarding the process for identifying potential bidders and what factors were considered by the debtors,” the committee’s objection says.
The committee notes that it wouldn’t object to Briggs finding limited financing to continue its operations that “did not otherwise dictate the terms of the debtors’ restricting.”
“That is not what is currently before the court. The proposed DIP financing, coupled with the proposed expedited all-asset sale to KPS Capital Partners, LP (“KPS”) for the seemingly low-ball bid of $550 million, appears to go well beyond the debtors’ financing needs,” the objection says.
Many of the objections levied against Briggs’ plan focus on the speed the company proposed to move at with an auction scheduled for Sept. 1 and court approval at a sale hearing on Sept. 11.
The U.S. Trustee specifically objected to the $16.5 million break-up fee included in the KPS deal. Any potential bidder would need to exceed the $550 million price by that amount at least, “which does not appear to encourage bidding,” the trustee’s office noted.
