Briggs & Stratton, unwavering in suburban lawn culture, go broke

Briggs & Stratton snow throwers

Source: Briggs & Stratton

Another symbol of post war period The American suburb went bust when Briggs & Stratton Corp. Filed for bankruptcy, which was undone by weak sales, excessive debt and one last pressure over the border of the coronavirus pandemic.

The world’s largest manufacturer of gasoline engines for outdoor power supplies filed for protection from creditors in a bankruptcy court in St. Louis Monday, citing debts of more than $ 1 billion. The filing included a $ 550 million bid for the company from KPS Capital Partners, a New York private equity firm that pledged to keep Briggs & Stratton in business without breaking the debt that plagued the centuries-old company .

KPS, whose portfolio includes TaylorMade golf clubs and Life Fitness fitness equipment, specializes in manufacturing companies. It agreed to act as the main bidder in a court-supervised auction and to set a minimum price for a possible sale. According to a statement, it contributes to a bankruptcy loan that keeps Briggs & Stratton going. KPS said it has already negotiated a new contract with the United Steelworkers of America.

Briggs & Stratton stocks have wilted at high levels since 2004

If you’ve ever pushed or driven a lawnmower in your yard, or used a snow blower, the engine was likely made by Briggs & Stratton, which supplied brands like Craftsman and Snapper.

If you hired a lawn service instead, some of their equipment likely had Briggs & Stratton components as well. The company sold products to Deere & Co., MTD Products Inc., and Husqvarna Outdoor Products Group. The Wisconsin-based company’s line of products also includes power generators and pressure washers, which were manufactured by 5,200 employees late last year. In 2005 more than 9,000 people were employed.

The company has been put under pressure by falling sales, in part due to the pricing power of bulk retailers like Home Depot, Lowe’s, and Walmart. It didn’t help that Sears Holdings Corp., which accounted for a large portion of its revenue, went bankrupt in 2018. Briggs & Stratton said they also face competition from big competitors like Honda Motor Co. and Kawasaki Heavy Industries Ltd. is exposed.

In addition, Briggs & Stratton’s bankruptcy press release cited the pressures of the Covid-19 pandemic which “has made reorganization a difficult but necessary and appropriate way to keep our business secure”.

The company, which has been led by Chief Executive Officer Todd Teske since 2010, is facing a third straight annual loss, and the stock, which topped $ 40 in 2004, sold for less than 80 cents.

Trading ceased on Monday while the news was spreading, but at $ 550 million, KPS’s offer would not be enough to cover all of its outstanding commitments, meaning shareholders could be wiped out. The company’s junior bonds would have to be repaid before shareholders could get anything, and those bonds recently traded around 10 cents on the dollar – a sign that full repayment is unlikely.

Acquisitions planned

“KPS intends to aggressively grow the new Briggs & Stratton through strategic acquisitions,” said Michael Psaros, co-founder and co-managing partner of KPS, in a statement. “The new Briggs & Stratton is capitalized conservatively and not encumbered by the substantial liabilities of its predecessor.”

KPS’s offer would have to be approved by the court and could be topped by a competing bid for the company, which is headquartered in Wauwatosa, less than 10 miles from downtown Milwaukee.

Briggs & Stratton said in its statement that it has provided $ 677.5 million in debt financing that will help fund business operations during the judicial reorganization. KPS said it contributed $ 265 million of that sum.

Banks such as Wells Fargo & Co., Bank of America Corp., BMO Harris Bank and PNC Business Credit will provide exit financing for a new company created by the acquisition of Briggs & Stratton’s assets, according to a spokesperson for KPS.

Briggs & Stratton began as an informal partnership in 1908 that initially focused on auto parts under founders Stephen F. Briggs and Harold M. Stratton, according to the company’s website. (“Briggs was the inventor and Stratton was the investor,” the company said.) They ventured into areas like motorized bicycles, electric refrigerators, and coin-operated paper towel dispensers, and their business flourished alongside American suburbs dotted with single-family houses and grass-covered ones Yards.

Global reach

New York-based KPS operates the KPS Special Situations Fund with assets of more than $ 11.4 billion. The company stated that its portfolio companies operate 150 manufacturing facilities in 26 countries with around 23,000 employees.

Kirkland & Ellis is a legal advisor to KPS. Briggs & Stratton previously engaged Houlihan Lokey Inc. to advise the company on strategic options such as refinancing its debt, selling assets and cutting costs.

The case is Briggs & Stratton Corporation, 20-43597, US Bankruptcy Court, Eastern District of Missouri (St. Louis).

((Updates with additional details on exit funding in paragraph 13)

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