Briggs & Stratton files for bankruptcy protection, plans to sell assets and continue operating – Milwaukee Journal Sentinel

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Briggs & Stratton's plant at 3300 N. 124th St. in Wauwatosa is shown June 30, 2020. At one time the company employed thousands at four plants in the area. Now it's down to a few hundred people, and that's about to drop even further with the company moving production to a nonunion plant in New York.(Photo: Angela Peterson / Milwaukee Journal Sentinel)

Small engine manufacturer Briggs & Stratton Corp., founded in Milwaukee in 1908, on Monday filed for bankruptcy protection with plans to sell its assets to a private equity firm that specializes in manufacturing and has done previous deals in Wisconsin.

Briggs filed for Chapter 11 in the U.S. Bankruptcy Courtfor theEastern District of Missouri. Under Chapter 11, a company and its creditors work out a reorganization plan that enables the business to continue to operate.

Briggs, the world's largest manufacturer of small gasoline engines, employs about 5,000 people worldwide including around 1,300 in the Milwaukee area. Years ago, the company had 11,000 employees just in Wisconsin.

As part of the bankruptcy, KPS Capital Partners LP, a New York private equity firm, agreed to buy all of Briggsassets for approximately $550 million.

The so-called stalking horse bid sets a minimum price for the sale.

The offer would need court approval and could still be topped by another bidder, but for now it's probably "the best outcome they could come up with," said analyst Tom Hayes with Northcoast Research.

The manufacturer of small engines used in outdoor power equipment around the world said it arranged for $677.5 million of debtor-in-possession financing that would help fund operations during the bankruptcy proceedings. KPS said it agreed to provide $265 million of that amount as part of the reorganization.

"KPS intends to grow the new Briggs & Stratton aggressively through strategic acquisitions. The new Briggs & Stratton will be conservatively capitalized and not encumbered by its predecessor's significant liabilities," Michael Psaros, co-managing partner of KPS, said in a statement.

The private equity firm also said it has entered into an agreement in principle with the United Steelworkers of America for a new collective bargaining agreement for Briggs hourly employees represented by the union in the Milwaukee area. The agreement would become effective upon completion of the acquisition and reorganization.

"KPS has a proven track record of investing in manufacturing facilities and operating them profitably and sustainably," Steelworkers President Tom Conway said in a statement.

Retirees, on the other hand, are losing their supplemental health and life insurance.

On Sunday, Briggs' board of directors voted to terminate the group insurance plan for retirees. "Your health and life insurance coverage (under the plan) will end on August 31, 2020. Any eligible claims incurred on or before August 31 will be covered by the plan," the company said.

"There will be some effect on the pension obligations. This will be covered by the bankruptcy court," company spokesman Rick Carpenter said in an email to the Journal Sentinel, referring retirees to a frequently asked questions document.

Briggs & Stratton joins other large companies many of them in the retail and energy sectors that have filed for bankruptcy in recent months.

Briggs was losing money and burdened by large debts when the economic downturn caused by coronavirus hit. Its sales fell by $107 million, or 18%, to $474 millionin its thirdquarter ended March 29, compared with the same period a year earlier.

The company warned that its losses, the pandemic and pending debt payments raised substantial doubt about its ability to continue as a going concern. Yet in June, while it skipped a $6.7 million interest payment, the company awarded its executives and other key employees more than $5 million in cash retention awards.

Such awards are often given before a company files for bankruptcy.

"Whether you like the management team or not, they likely get to stay in place for the foreseeable future," Hayes said.

Briggs makessmall engines, residential and commercial lawn and garden equipment, portable generators, pressure washers, snow throwers and other outdoor power equipment. The companys products are sold in more than 100 countries under such brands as Briggs & Stratton, Victa, Simplicity, Ferris, Billy Goat, Vanguard, Branco and Allmand. It also sells engines to other manufacturers, including Deere & Co., the Toro Co. and Viking.

Briggs has plants in Wisconsin, Alabama, Georgia, Missouri and New York as well as Australia and China. The company recently said it was cutting more than 200 jobs in Wauwatosa as part of an earlier announced move of production work to its factory in Munnsville, New York.

It's unknown yet whether Briggs will eliminate more jobs.

"I don't think they can do a lot more trimming" without shedding product lines, Hayes said. "The plants have been consolidated. I don't think it would make sense to offshore other production."

Briggs short-term debt includes $195.5 million in bonds due in December. That debt had to be refinanced by Sept. 15or the company would be in violation of its loan agreements with a consortium of banks, enabling them to demand immediate repayment.

The company had planned to do that by selling some businesses.

They kind of boxed themselves in a corner, Hayes said.

In March, Briggs announced plans to sell its commercial turf products business, sold under brand names such as Ferris, Billy Goat, Simplicity and Snapper, and its pressure washer and portable generator product lines.

"It seems like they took that off the table for now," Hayes said.

The smaller company would focus on engines for residential outdoor power equipment, commercial engines, standby power generation and commercial battery systems.

"Technological advances are increasingly making battery-powered products competitive with engine-driven equipment in terms of performance, principally on the residential side, as well as the commercial side to a lesser degree," Briggs said.

The company hasmore thanhalf of the engine market for residentialoutdoor power equipment and established brands.

Dan Ariens, president and CEO of AriensCo., a Brillion-based manufacturer of lawn and garden equipment and snow throwers, said he was surprised that Briggs wasn't able to avoid Chapter 11 even as the engine maker has struggled.

KPS has made investments in Wisconsin paper mills and Waupaca Foundry. The firm says companies in its portfolio operate 150 manufacturing plants in 26 countries, with about 23,000 employees.

"The statement that KPS put out sounded like the right plan. The Briggs brand is very strong, and I think the focus on that will be good," Ariens said.

The company was founded in 1908 by Stephen Briggs, an inventor, and Harold Stratton, an investor, and incorporated in 1910. It initially grew by making parts for the booming automobile industrystarter switches were an early core product small engines for such revolutionary products as washing machines as well as garden tractors, cultivators and generators.

In 1953, it introduced the first lightweight aluminum engine that found a ready market in lawn mowers just as Americans were flocking to the suburbs. The company produced more than 2 million engines a year on average throughout the 1950s.

Briggs had four manufacturing plants in the Milwaukee area at one time. But the company, which was hurt by an increase in foreign competition in the 1980s, also had a history of conflict with labor unions and over the decades moved much of its manufacturing to other states.

The company also has a history of opening and then closing plants in Wisconsin, Missouri, Kentucky, Tennessee, Alabama and other locations.

Briggs closed its plant in Port Washington in 2008 and its plants in Jefferson and Watertown in 2009.

In 2007, it closed its engine plant in Rolla, Missouri, that once employed up to 800 people moving much of that production to China. In 2012, it announced the closing of a plant in Newbern, Tennessee, resulting in the loss of almost 700 jobs. It also closed its plant in the Czech Republic that year.

The company hasnt hada consistent path in recent years, Hayes said.

Its been, Let me turn this dial and turn that dial, he said.

Trading of Briggs shares was halted Monday morning as the share price hovered at around 77 cents.

Moody's Investors Service downgraded the company's probability of defaulting on $195 million in outstanding debt.

"The downgrades reflect Briggs & Stratton's substantial earnings decline and inability to generate positive annual free cash flow which, exacerbated by the coronavirus outbreak, accelerated the company's missed interest payment and ultimately, bankruptcy filing," Moody's Vice President Gigi Adamo said in a statement.

"Absent the bankruptcy filing, the expiration of the missed interest payment grace period on the company's $195 million outstanding notes due December 2020 would have allowed noteholders to accelerate the payment of principal and accrued interest," Adamo added.

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Briggs & Stratton files for bankruptcy protection, plans to sell assets and continue operating - Milwaukee Journal Sentinel