Briggs & Stratton Corp.’s unsecured creditors will receive 7 cents to 10 cents on the dollar depending on when the company completes its bankruptcy court-approved sale to KPS Capital Partners.
The final amount will depend partly on how quickly Wauwatosa-based Briggs can complete its sale to the New York City private equity firm. The sooner the sale is transacted, the more money will be available, said attorneys for Briggs & Stratton and its unsecured creditors committee.
“The unsecured creditors are not getting huge returns,” Robert Stark, the lead attorney for the unsecured creditors committee, said Tuesday during a hearing on the sale plan.
U.S. Bankruptcy Court Judge Barry Schermer presided over the hearing Tuesday morning and on Tuesday afternoon approved the plan.
Briggs & Stratton reached agreements with its unsecured creditors committee and the Pension Benefit Guaranty Corp. prior to the hearing that cleared the path for Schermer’s approval.
Schermer complimented attorneys for Briggs and its unsecured creditors committee for their efforts to reach a settlement and avoid a trial, which Stark on Sept. 1 said he was planning to pursue.
“You got the best result out of a sub-optimal situation,” Schermer said to Stark. “Good for you.”
Schermer's approval of the plan will allow Briggs & Stratton and KPS to proceed with the transaction they announced July 20 when Briggs filed for Chapter 11 bankruptcy. The sale will be completed the week of Sept. 21, said Ronit Berkovich, an attorney for Briggs.
The funds available to unsecured creditors will range from $35 million to $45 million, assuming the sale closes swiftly, Stark said. That would yield payments of 7 cents to 8.4 cents on the dollar, he said.
The figure could increase to 10 cents on the dollar if the funds available reach close to $50 million, Stark said.
Briggs financial performance has improved since July 20 when the company filed for bankruptcy, which will provide more cash than the company and its advisers initially assumed, Berkovich said. Also, the company received regulatory approvals sooner than anticipated, which helps accelerate the deal, she said.
Although Briggs attorney Christopher Lawhorn called the settlement “a home run for all parties involved,” Stark said he disagreed.
Pursuing a trial would have been complicated and costly and would not have guaranteed funds for unsecured creditors, he said.
Stark said the unsecured creditors committee determined their best chance to recover some funds was to support the fast-track sale. The longer it takes to sell Briggs & Stratton, the more cash the company will burn running its business, he noted.
“This company is not generating cash to cover its bankruptcy costs,” Stark said.
KPS is paying $550 million for Briggs & Stratton, which Berkovich said is “a fair and reasonable price” and “the highest and best offer for the company." In fact, no other bidders emerged before or during the bankruptcy case to buy the company in its entirety, she said.
“No one offered anything close to the amount KPS is prepared to pay,” she said.
The sale involves KPS assuming “hundreds of millions of dollars” of Briggs' liabilities while preserving a global business, employment and vendor relationships, Berkovich said.
The Pension Benefit Guaranty Corp. will assume Briggs' pension plan and receive between 4 cents and 5.6 cents on the dollar, Stark said.
Briggs’ largest unsecured creditor from the outset of the case has been a group of investors in $195 million in unsecured notes. The settlement designates the PBGC for a $225 million unsecured claim.