Item 1.03. Bankruptcy or Receivership.
Chapter 11 Filing
On July 20, 2020, Briggs & Stratton Corporation (the “Company”) and certain of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Bankruptcy Petitions,” and the cases commenced thereby, the “Chapter 11 Cases”) for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for Eastern District of Missouri (the “Bankruptcy Court”). The Debtors have filed a motion with the Bankruptcy Court seeking joint administration of the Chapter 11 Cases under the caption “In re Briggs & Stratton Corporation, et al.”
No trustee has been appointed and the Company will continue to manage itself and its subsidiaries as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Debtors are seeking approval of a variety of “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations. In connection with the Chapter 11 Cases, the Debtors are seeking authority to sell substantially all of their assets pursuant to Section 363 of the Bankruptcy Code. Bankruptcy Court filings and other information related to the Chapter 11 Cases are available at a website administered by the Company’s noticing and claims agent, Kurtzman Carson Consultants LLC, at http://www.kccllc.net/Briggs.
SAPA
In connection with the Chapter 11 Cases, effective July 19, 2020 (the “Execution Date”), the Company, Billy Goat Industries, Inc., Allmand Bros., Inc., Briggs & Stratton International, Inc. and Briggs & Stratton Tech, LLC (collectively with the Company, “Sellers”) entered into a stock and asset purchase agreement (the “SAPA”) with Bucephalus Buyer, LLC (“Buyer”), a newly formed affiliate of KPS Capital Partners, LP. Pursuant to the terms of the SAPA, Sellers agreed to sell to Buyer (i) all or substantially all of Sellers’ assets and (ii) Sellers’ equity interests in certain of Sellers’ subsidiaries and Sellers’ equity interests in certain joint ventures, and Buyer agreed to assume certain of Sellers’ liabilities (the “Transactions”) for a cash purchase price of $550,000,000, subject to certain customary purchase price adjustments (the “Purchase Price”).
In connection with the execution of the SAPA, Buyer will deposit, immediately following the execution of the SAPA, $55,000,000 to be held in escrow. Upon the closing of the Transactions, the deposit will be credited against the Purchase Price. The SAPA contains customary representations, warranties and covenants. The parties expect to close the Transactions in the fourth calendar quarter of 2020, subject to customary closing conditions and approval by the Bankruptcy Court. The SAPA does not impose any post-closing indemnification obligations on either Sellers or Buyer.
Sellers have filed the SAPA with the Bankruptcy Court along with a motion seeking, among other relief, the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers to purchase (i) all or substantially all of Sellers’ assets and (ii) Sellers’ equity interests in certain of Sellers’ subsidiaries and Sellers’ equity interests in certain joint ventures.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
The SAPA may be terminated, subject to certain exceptions: (i) by the mutual written consent of the parties; (ii) by any party, by giving written notice to the other parties if (a) any court of competent jurisdiction or other competent governmental authority issues a final, non-appealable order prohibiting the Transactions or (b) if the closing has not occurred prior to November 20, 2020 (the “Outside Date”), provided that the Outside Date shall be automatically extended to December 31, 2020 if the applicable waiting periods under the antitrust and foreign investment laws of certain jurisdictions have not expired or otherwise been terminated, including, where applicable, by way of a positive-clearance decision; (iii) by any party, for certain material breaches by the other parties of representations and warranties or covenants that remain uncured; (iv) by any party, if (I) (A) (x) Sellers enter into a definitive agreement with respect to a competing bid and (y) the Bankruptcy Court enters an order approving a competing bid, (B) the Bankruptcy Court enters an order that precludes the consummation of the transactions on the terms and conditions set forth in the SAPA or (C) Buyer is not the prevailing bidder or backup bidder in an auction and (II) the person making the competing bid consummates the competing bid, subject to Buyer’s right to payment of a termination payment and expense reimbursement payment; (v) by Buyer if certain milestones related to the approval of the Transactions by the Bankruptcy Court are not met; or (vi) by Buyer by giving written notice to Sellers if Sellers breach the terms of the SAPA with respect to requesting a credit extension under the DIP Facility (as defined below), and such breach has not been waived by Buyer.
The description of the SAPA set forth above is qualified in its entirety by reference to the SAPA filed herewith as Exhibit 2.1 and incorporated herein by reference.
DIP Credit Agreement
In connection with the Chapter 11 Cases, the Debtors filed motions seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in that certain Senior Secured Debtor-in-Possession Revolving and Term Credit Agreement, to be dated on or around July 22, 2020 (the “DIP Credit Agreement”), among the Company, as lead borrower, each of the other borrowers from time to time party thereto, the various lenders and issuing banks from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “DIP Agent”).
It is expected that the DIP Credit Agreement will provide for a senior secured priming debtor-in-possession financing in an aggregate principal amount not to exceed, as of the DIP Closing Date (as defined in the DIP Credit Agreement), $677.5 million and, as of the DIP Term Loan Closing Date (as defined in the DIP Credit Agreement), $615 million comprising of: (i) a superpriority senior secured priming first-out asset-based revolving credit facility in an aggregate principal amount not to exceed, as of the DIP Closing Date and prior to the DIP Term Loan Closing Date, $412.5 million and, on and after the DIP Term Loan Closing Date, $350 million(the “DIP ABL Facility”) with up to $6 million available under a letter of credit sublimit (other than Existing Letters of Credit (as defined in the DIP Credit Agreement)), which not more than (a) as of the DIP Closing Date and prior to the DIP Term Loan Closing Date, $383.7 million and, on and after the DIP Term Loan Closing Date, $321.2 million, of the principal amount of the DIP ABL Facility will be made available to the Company and (b) both as of the DIP Closing Date and DIP Term Loan Closing Date, $28.8 million of the principal amount of the DIP ABL Facility will be made available to Briggs & Stratton AG, in each case subject to a borrowing base consisting of certain accounts and inventory, and prior to the entry of the Final Order, equipment, trademarks and real estate; and (ii) a superpriority senior secured priming last-out term loan facility in an aggregate principal amount of, as of the DIP Closing Date, $265 million (the “DIP Term Loan Facility” and, together with the DIP ABL Facility, the “DIP Facilities”), subject to the terms and conditions set forth therein. The maturity date of the DIP Facilities is 9 months from the date of the DIP Credit Agreement.
Loans under the DIP ABL Facility will bear interest at: (i) LIBOR for the applicable interest period plus 3.50% or (ii) the base rate (which is the highest of (a) the U.S. prime rate quoted by The Wall Street Journal,
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
(b) the greater of (x) the federal funds rate and (y) the overnight bank funding rate, plus in each case 0.50%, (c) the sum of 1% plus one-month LIBOR and (d) 2.00%) (the “Base Rate”) plus 2.50%. Loans under the DIP Term Loan Facility will bear interest at: (i) LIBOR for the applicable interest period plus 7.00% or (ii) the Base Rate plus 6.00%.
The Company must also pay (i) an unused line fee of 0.25% per annum (a) during the Interim Period, on the average daily unused portion of the Interim DIP Amount and (b) after the Interim Period, on the average daily unused portion of the DIP ABL Facility, (ii) letter of credit participation fees to the lenders under the DIP Credit Agreement of 3.50% per annum on the undrawn amount of letters of credit and (iii) letter of credit fronting fees to each issuer of letters of credit under the Credit Agreement in the amount of 0.125% per annum on the undrawn amount of the letters of credit issued by such issuer.
The DIP Credit Agreement includes certain customary representations and warranties, covenants applicable to the Company and, with certain exceptions, its subsidiaries, and events of default. If an event of default under the DIP Credit Agreement occurs and is continuing, then the DIP Agent may declare any outstanding obligations under the DIP Credit Agreement to be immediately due and payable.
The obligations under the DIP Credit Agreement are guaranteed by (i) Billy Goat Industries, Inc., Allmand Bros., Inc., Briggs & Stratton International, Inc., Briggs & Stratton Tech, LLC, and each other subsidiary of the Company incorporated or otherwise organized under the laws of any State within the United States, subject to exceptions to be agreed upon by the Company and the DIP Agent prior to the Petition Date and (ii) Briggs & Stratton International AG, Briggs & Stratton Australia Pty. Limited and Victa Ltd. and, subject to customary exceptions consistent with the Prepetition Credit Agreement, each other subsidiary of the Company organized in a jurisdiction outside the United States (the “Guarantors”). Subject to customary exceptions and limitations, all of the borrowings under the DIP Credit Agreement are secured by a lien on substantially all of the assets of the Company and each Guarantor, including all of the assets included in the borrowing base.
The description of the DIP Credit Agreement set forth above is qualified in its entirety by reference to the final, executed DIP Credit Agreement, as approved by the Bankruptcy Court.