Tag Archives: Bankrupt

World’s Largest Producer Of Small Gasoline Engines Files For Bankruptcy

Briggs & Stratton Corporation, the world’s largest manufacturer of small gasoline engines with headquarters in Wauwatosa, Wisconsin, filed petitions on Monday morning for a court-supervised voluntary reorganization under Chapter 11, along with plans to sell “all the company’s assets” to KPS Capital Partners.

The Fortune 1000 manufacturer of gasoline engines was able to secure a $677.5 million in Debtor-In-Possession (DIP) financing to support operations through reorganization efforts. The Company also said it “entered into a definitive stock and asset purchase agreement with KPS.”

To facilitate the sale process and address its debt obligations, the Company has filed petitions for a court-supervised voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company has also obtained $677.5 million in DIP financing, with $265 million committed by KPS and the remaining $412.5 from the Company’s existing group of ABL lenders. Following court approval, the DIP facility will ensure that the Company has sufficient liquidity to continue normal operations and to meet its financial obligations during the Chapter 11 process, including the timely payment of employee wages and health benefits, continued servicing of customer orders and shipments, and other obligations.

This process will allow the Company to ensure the viability of its business while providing sufficient liquidity to fully support operations through the closing of the transaction. Briggs & Stratton believes this process will benefit its employees, customers, channel partners, and suppliers, and best positions the Company for long-term success. This filing does not include any of Briggs & Stratton’s international subsidiaries. – Briggs & Stratton’s press release states

Todd Teske, Briggs & Stratton’s CEO, stated the Company faced “challenges” during the virus pandemic that made reorganization “necessary and appropriate” for the survivability of the Company.  

“Over the past several months, we have explored multiple options with our advisors to strengthen our financial position and flexibility. The challenges we have faced during the COVID-19 pandemic have made reorganization the difficult but necessary and appropriate path forward to secure our business. It also gives us support to execute on our strategic plans to bring greater value to our customers and channel partners. Throughout this process, Briggs & Stratton products will continue to be produced, distributed, sold and fully backed by our dedicated team,” said Teske. 

Briggs & Stratton is the world’s top engine designer and manufacturer for outdoor power equipment, with 85% of the small engines produced in the U.S. The pandemic and resulting virus-induced recession have been brutal for the Company, with declining engine sales, resulting in a reduction in the US workforce. 

Financial Times noted, in June, the Company had difficulty refinancing a $175 million bond that matured in September. Sources told FT the Company’s deteriorating position made it impossible to obtain refinancing funds in the bond market. 

Add Briggs & Stratton to the list of bankrupted companies as an avalanche of bankruptcies is expected in the second half of the year.

Not surprising whatsoever, Robinhood day traders have panic bought collapsing Briggs & Stratton shares. 

The bankruptcy wave is not over, it’s only getting started as the virus-induced recession will be more prolonged than previously thought.

Source: ZeroHedge

The “Failing Angels” Are Back

Lehman, WorldCom And Now PG&E

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(ZeroHedge) One week ago when we wrote that with PG&E facing a threat of an imminent bankruptcy (which we now know will soon be realized), the most bizarre development in this latest corporate fiasco was that until the first week of January, both S&P and Moody’s had rated the California utility with over $30 billion in debt as investment grade even as its bonds and stocks were cratering ahead of what investors deemed to be an imminent Chapter 11 filing.

And while we have extensively discussed the multi-trillion threat posed by “falling angel” companies, or those corporations rated BBB – the lowest investment grade equivalent rating – as they slide into junk territory, the recent events surrounding PG&E highlight an even greater blind spot in the corporate bond arsenal: that of the failing angel.

As Bank of America’s Hans Mikkelsen wrote in a recent research note, Investment Grade defaults – defined as defaults within one year of being rated IG – are “rare and unpredictable” (even if in the case of PG&E, its downfall was quite obvious to many) as globally in more than half of years historically there were no HG defaults at all.

https://www.zerohedge.com/s3/files/inline-images/PG%26EBOFA1.jpg?itok=76YRhTp2

As such, Monday’s pre-announcement by The Pacific Gas and Electric Company (PCG) that it intends to file Chapter 11 by January 29th…

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… is a singular event and if the company follows through, it will become the third largest IG default since 1999, behind Lehman and Worldcom, with $17.5bn of index eligible debt.

The chart below lists all US index defaults since 1999 that occurred within one year of being included in ICE BofAML benchmark US high grade index. The three largest defaults in terms of index notional were Lehman ($34.9bn), WorldCom ($22.9bn) and CIT Group ($12.4bn).

https://www.zerohedge.com/s3/files/inline-images/PG%26E%20BOFA4.jpg?itok=I3W3gy_w

In fact, as BofA adds, if PG&E does file before the end of the month the company will become a member of a much more exclusive group of “Failing Angel”, formerly-IG companies consisting of Enron, Lehman and MF Global that defaulted directly out of IG, before making it into the HY index as Fallen Angels.

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Ironically, as Mikkelsen adds, until recently he had looked at PCG as set to become a large Fallen Angel from BBB accounting for 1.4% of the HY market. Now it appears the company plans to bypass the HY market, and proceed straight to default.

So as the world obsesses over the risk of “falling angels”, just how many other “failing angels” are hiding in the shadows, waiting for their moment to wipe out billions in stakeholder value as the economy continues to slowdown to what is now an inevitable recession, and just what will the knock-on effects of this “historic” default be? We will find out in less than two weeks.

Source: ZeroHedge