The company typically would build up inventory over the summer for sale later in the year, but this approach needed to change in order to reduce the cash burn. The pandemic had a silver lining for Briggs & Stratton: families forced to stay at home started spending more time in their backyards, cutting grass and doing home improvements. This was good for revenues, but the cash to support them remained scarce.
Strategic decisions taken by the company, including taking temporary pay cuts, along with government payroll tax deferrals, helped improve cash flow. All the while EY teams were working with the company and other advisors to see if alternative capital raises might be possible.
“I came to realize that there is a bankruptcy club of sorts,” recalls Buono, “involving banks, accountants, and lawyers who all know each other and are experts at what they do. It was a huge advantage to us that EY was a member of that club and had access to key players in the industry. They could work together efficiently and the communication never missed a beat.”
EY teams identified three key liabilities: a revolving credit facility for working capital funding; US$195m in unsecured notes due to be repaid in December 2020 and an unfunded pension liability. The total was almost US$1 billion. Lenders were presented with a pragmatic plan for the company, based on tangible actions and economic derived inputs, rather than an optimistic hockey stick-shaped forecast.
“EY managed the process and information flow particularly well, but more than that they took the time to make it personal,” says Buono. “Given that everything had to be done virtually due to the pandemic, and we were all basically working 24/7, the relationship building was important. EY people were easy to reach — you never felt you were imposing on their time — they were genuine, capable, intelligent and fun to work with.”
Ultimately, a Chapter 11 filing was necessary as part of the strategy to turnaround the company and in July 2020, the company filed for bankruptcy protection with a stalking horse purchaser in place, funding for the Chapter 11 process available and a path forward in sight.
The sales and marketing process resulted in the same conclusion as EY’s valuation analysis - the company was worth more as a whole than if it was broken up. Eventually, with no other credible bidders emerging for the entire business, the company’s lenders and creditor stakeholders were convinced of the plan that saved the company in its entirety and the stalking horse bidder (KPS Capital Partners) was confirmed as the successful purchaser.
Secured creditors were covered in whole while the total process (managed entirely remotely and leveraging EY’s proprietary tech tools and platform) took just 63 days from filing to closing. The aggressive timeline was essential to preserve as much value in the company as possible.
