Gas engine maker Briggs & Stratton filed for bankruptcy on Monday to effectuate a sale of the company as it faces losses, pending debt payments and the coronavirus crisis.
As part of the Chapter 11 filing, private equity firm KPS Capital has made a $550 million “stalking horse” offer to buy all of Briggs & Stratton’s assets. It will also provide $265 million to keep the company operating during the bankruptcy process.
The filing came after Briggs issued a going-concern warning and hired restructuring advisers in May to help address its debt burden.
“Over the past several months, we have explored multiple options with our advisers to strengthen our financial position and flexibility,” CEO Todd Teske said in a news release. “The challenges we have faced during the COVID-19 pandemic have made reorganization the difficult but necessary and appropriate path forward to secure our business.”
The coronavirus pandemic had added to Briggs’ liquidity problems as the company shuttered plants and its customers reduced orders. Its sales fell by 18% to $474 million in the third quarter ended March 29 and it was expecting a $157 million sales hit from the pandemic for the fourth quarter.
Briggs, which was founded in 1908 by inventor Stephen Briggs and investor Harold Stratton, makes engines that are used primarily by the lawn and garden equipment industry for lawn mowers, garden tillers, and snow throwers. Its products are sold in more than 100 countries.
According to the Milwaukee Journal Sentinel, the company was “losing money and burdened by large debts when the economic downturn caused by the coronavirus pandemic hit.”
As of March 31, Briggs had short-term debt of $597.5 million and long-term debt of $7 million. The short-term debt includes $195.5 million in bonds due in December that had to be refinanced by Sept. 15 or the company would be in violation of its loan agreements with a consortium of banks, enabling them to demand immediate repayment.
KPS Capital’s bid sets a minimum price for Briggs’ assets. “KPS intends to grow the new Briggs & Stratton aggressively through strategic acquisitions,” Co-Managing Partner Michael Psaros said.