Instead of fast-track auction

Reports from the U.S suggest that the largest unsecured creditors of Briggs & Stratton, believe a business reorganisation rather than an assets auction could result in a better financial outcome for the company’s trade creditors, retiree health plan and pensioners.

The Milwaukee Business Journal says these creditors wish to delay the manufacturer’s fast-track plan to sell its assets at auction.

As reported previously, Briggs & Stratton entered into Chapter 11 bankruptcy protection, with private equity firm KPS Capital Partners named as a staking-horse bidder - with a figure of $550 agreed to purchase most of the small engine maker's assets. KPS is also to contribute $265 million to debtor-in-possession financing to keep the company operating during the process. 

The Milwaukee Business Journal writes, " . .the company proposes an auction process with an Aug. 28 bid deadline and a Sept. 11 hearing on the sale. That would complete the Chapter 11 process within 7.5 weeks of Briggs & Stratton’s bankruptcy filing and allegedly give an unfair advantage to stalking-horse bidder KPS Capital Partners, said attorneys representing the holders of $195 million in senior unsecured notes."

The local business journal goes on to say, "If the bankruptcy court judge approves the Briggs-KPS proposal, the company’s retiree benefits plan, pension obligations and trade creditors “stand to receive very little if anything,” the note holders said.

"The company said its board voted prior to the Chapter 11 filing to terminate the company's group insurance plan for retirees, which provides retiree health and welfare benefits. With the termination, benefits will cease on Aug. 31.

"A reorganization plan, on the other hand, could potentially preserve some financial value for those stakeholders and others, the objection states.

"The note holders suggest that selling Briggs' “several distinct businesses” separately rather than as a whole “may realize optimal value.” Another possibility would be a combination of selling some non-core assets and reorganizing the company’s core business, the note holders said.

"The note holders also questioned Briggs & Stratton’s statements about the need for $275 million to maintain its product inventory when the company reported large inventory levels for the quarter ending March 31. The creditors said heavy spending on building inventory is “puzzling” and “must be scrutinized.”"

Leave a comment

You are commenting as guest.