November 10, 2020 – The Court hearing the Briggs & Stratton Corporation cases issued an order approving (i) the Debtors’ Disclosure Statement, (ii) proposed Plan solicitation and voting procedures and (iii) a proposed timetable culminating in a December 21st Plan confirmation hearing [Docket No. 1233].

On November 9th, the Debtors filed an updated Amended Plan and a related Disclosure Statement with each attaching blacklines showing changes to the versions filed on November 6th [Docket Nos. 1226 and 1227, respectively]. The amended Plan documents include changes reflecting the settlement reached with the Debtors' official committee of unsecured creditors (the "Creditors' Committee") and the Pension Benefit Guaranty Corporation ("PBGC") (see "Global Settlement," below).

Also on November 9, 2020, The Court hearing the Briggs & Stratton Corporation case extended the periods during which the Debtors have an exclusive right to file a Plan and solicit acceptances thereof, through and including February 15, 2021 and April 17, 2021, respectively [Docket No. 1223]. Absent the relief, the Plan filing and solicitation dates were scheduled to expire on November 17, 2020 and January 17, 2021, respectively.

Plan Overview

The Disclosure Statement [Docket No. 1227] notes: “Through the Stalking Horse Agreement…the Debtors secured a guaranteed purchase price of $550 million (subject to adjustment) plus assumed liabilities for their business and through the bidding procedures developed by the Debtors and their advisors, the Debtors retained the right to seek and accept a higher or better bid allowing for potential increased recovery for creditors. While the Debtors did not receive a higher or better bid, the Debtors still achieved a substantial purchase price for their assets, which the Debtors believe reflects the value of their estates and will allow creditors to receive the largest possible recovery from the Debtors’ estates under the circumstances, which will allow the Debtors to pay unsecured creditors’ claims in part.

On September 15, 2020, the Bankruptcy Court entered an order authorizing the sale of the Debtors’ assets and equity interests to the Stalking Horse Bidder (the 'Sale Transaction'). The Sale Transaction closed on September 21, 2020, at which time the Purchaser paid the purchase price of $550 million to the Debtors through a combination of cash, credit bid and certain other deductions and adjustments, and the Purchaser assumed substantially all of the Debtors’ assets and assumed certain of the Debtors’ liabilities.

In the weeks leading to the hearing to approve the Sale Transaction (as defined herein), the Debtors entered into extensive negotiations with the Creditors’ Committee, the Pension Benefit Guaranty Corporation (the 'PBGC') (the Debtors’ largest creditor), the DIP Agent and DIP Lenders and the Purchaser to resolve the Creditors’ Committee’s and the PBGC’s potential objections to the Sale Transaction and to ensure the Debtors could move swiftly to consummate the Sale Transaction and the subsequent Plan with the support of the Creditors’ Committee and the PBGC. The parties were able to reach a global settlement (the 'Global Settlement'), by which the Creditors’ Committee and the PBGC consented to the Sale Transaction to the extent it was consummated before September 27, 2020. Under the Global Settlement, the Debtors and the Creditors’ Committee agreed to work in good faith on a chapter 11 plan to facilitate and give effect to the Global Settlement."

The Amended Disclosure Statement further states, "The Plan provides for the orderly distribution of each Debtor’s available cash, including (i) net cash proceeds received by the Debtors from the Sale Transaction (including any proceeds to be received post-closing thereof) (the 'Sale Transaction Proceeds'), and (ii) cash realized from the Debtors’ business and their wind-down operations, including the sale of any remaining assets that were not included in the Sale Transaction (the 'Wind-Down Proceeds').

The Plan provides that the Sale Transaction Proceeds and Wind-Down Proceeds shall be used to fund (i) the ongoing wind-down costs of the Chapter 11 Cases, and (ii) the Distributions to holders of Allowed Claims under the Plan. Specifically, the Plan provides that the Sale Transaction Proceeds and Wind-Down Proceeds shall be used, first, to (a) pay holders of Allowed (or reserve for holders of Disputed) Administrative Expense Claims, Fee Claims and DIP Claims; (b) to fund the wind-down process (pursuant to a wind-down budget); and (c) to satisfy any Statutory Fees required to be paid in accordance with the Bankruptcy Code, the Bankruptcy Rules or any order of the Bankruptcy Court.

Following such payments, the Plan provides that the remaining Sale Transaction Proceeds and Wind-Down Proceeds (the 'Net Cash Proceeds') shall be allocated among the Debtors as follows [these amounts have been changed under the Amended Plan]: 

• 79.0% of the Net Cash Proceeds shall be allocated to BSC (the 'Net Cash Proceeds (BSC)'), [increased from 77.7% under the Initial Plan];
• 8.1% of the Net Cash Proceeds shall be allocated to BGI (the 'Net Cash Proceeds (BGI)'), [reduced from 8.7%];
• 6.7% of the Net Cash Proceeds shall be allocated to ABI (the 'Net Cash Proceeds (ABI)'), [reduced from 7.0%];
• 4.8% of the Net Cash Proceeds shall be allocated to BSI (the 'Net Cash Proceeds (BSI)'), [reduced from 5.0%]; and
• 1.4% of the Net Cash Proceeds shall be allocated to BST (the 'Net Cash Proceeds (BST)'), [reduced from 1.7%].

The allocation above is based on an analysis by the Debtors’ financial advisor, Houlihan Lokey, in consultation with the Creditors’ Committee’s financial advisor. It allocates the Net Cash Proceeds based on an equal weighting of revenue, assets and adjusted EBITDA, subject to adjustments made based on bids received for the different entities, certain remaining assets and other qualitative factors such as intercompany relationships between the entities.

The Plan further provides that the Net Cash Proceeds allocable to each Debtor shall be distributed first to each Debtor’s priority and other secured claims and then pro rata (proportionately) to holders of General Unsecured Claims against such Debtor, in each case after giving effect to the 'PBGC Subordination,' which refers to the agreement of the PBGC, pursuant to the Global Settlement, to subordinate to other general unsecured creditors the first $5 million of the recovery it would otherwise receive from the Plan.

The Debtors do not expect there to be a recovery for shareholders.”

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are in the Plan and/or Disclosure Statement; see changes in bold and also the Recovery Analysis and the Liquidation Analysis below):

• Class 1(a) (“Priority Tax Claims against BSC”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 1(b) (“Priority Tax Claims against BGI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 1(c) (“Priority Tax Claims against ABI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 1(d) (“Priority Tax Claims against BSI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 1(e) (“Priority Tax Claims against BST”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 2(a) (“Priority Non-Tax Claims against BSC”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 2(b) (“Priority Non-Tax Claims against BGI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 2(c) (“Priority Non-Tax Claims against ABI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 2(d) (“Priority Non-Tax Claims against BSI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 2(e) (“Priority Non-Tax Claims against BST”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 3(a) (“Other Secured Claims against BSC”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 3(b) (“Other Secured Claims against BGI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 3(c) (“Other Secured Claims against ABI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 3(d) (“Other Secured Claims against BSI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 3(e) (“Other Secured Claims against BST”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 100%.
• Class 4(a) (“General Unsecured Claims against BSC”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 6% – 8%.  Each holder shall receive its Pro Rata share of the Net Cash Proceeds (BSC) after the Priority Tax Claims against BSC, Priority Non-Tax Claims against BSC and the Other Secured Claims against BSC are satisfied (or reserved for) in full in accordance with the Plan, until all General Unsecured Claims against BSC are satisfied in full in Cash; provided, however, for purposes of determining the Pro Rata share under the Plan, the PBGC Subordination shall be enforced. Net Cash Proceeds (BSC) means [77.7]% of the Net Cash Proceeds.
• Class 4(b) (“General Unsecured Claims against BGI”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 1% – 2%. Each holder shall receive its Pro Rata share of the Net Cash Proceeds (BGI) after the Priority Tax Claims against BGI, Priority Non-Tax Claims against BGI and the Other Secured Claims against BGI are satisfied (or reserved for) in full in accordance with the Plan, until all General Unsecured Claims against BGI are satisfied in full in Cash; provided, however, for purposes of determining the Pro Rata share under the Plan, the PBGC Subordination shall be enforced. Net Cash Proceeds (BGI) means [8.7]% of the Net Cash Proceeds. 
• Class 4(c) (“General Unsecured Claims against ABI”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 1% – 2%. Each holder shall receive its Pro Rata share of the Net Cash Proceeds (ABI) after the Priority Tax Claims against ABI, Priority Non-Tax Claims against ABI and the Other Secured Claims against ABI are satisfied (or reserved for) in full in accordance with the Plan, until all General Unsecured Claims against ABI are satisfied in full in Cash; provided, however, for purposes of determining the Pro Rata share under the Plan, the PBGC Subordination shall be enforced. Net Cash Proceeds (ABI) means [7.0]% of the Net Cash Proceeds.
• Class 4(d) (“General Unsecured Claims against BSI”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is N/A (The Debtors believe that the PBGC is the only creditor in this class). Each holder shall receive its Pro Rata share of the Net Cash Proceeds (BSI) after the Priority Tax Claims against BSI, Priority Non-Tax Claims against BSI and the Other Secured Claims against BSI are satisfied (or reserved for) in full in accordance with the Plan, until all General Unsecured Claims against BSI are satisfied in full in Cash; provided, however, for purposes of determining the Pro Rata share under the Plan, the PBGC Subordination shall be enforced. Net Cash Proceeds (BSI) means [5.0]% of the Net Cash Proceeds. 
• Class 4(e) (“General Unsecured Claims against BST”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0.1% (The Debtors believe that the PBGC is the only creditor in this class). Each holder thereof shall receive its Pro Rata share of the Net Cash Proceeds (BST) after the Priority Tax Claims against BST, Priority Non-Tax Claims against BST and the Other Secured Claims against BST are satisfied (or reserved for) in full in accordance with the Plan, until all General Unsecured Claims against BST are satisfied in full in Cash; provided, however, for purposes of determining the Pro Rata share under the Plan, the PBGC Subordination shall be enforced. Net Cash Proceeds (BST) means [1.7]% of the Net Cash Proceeds. 
• Class 5(a) (“Subordinated Securities Claims against BSC”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 5(b) (“Subordinated Securities Claims against BGI”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 5(c) (“Subordinated Securities Claims against ABI”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 5(d) (“Subordinated Securities Claims against BSI”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 5(e) (“Subordinated Securities Claims against BST”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 6(a) (“Intercompany Interests in BGI”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 6(b) (“Intercompany Interests in ABI”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 6(c) (“Intercompany Interests in BSI”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 6(d) (“Intercompany Interests in BST”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.
• Class 7(a) (“Equity Interests in BSC”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is 0%.

The Amended Plan specifies that the estimated recovery for general unsecured claims depends on the amount of priority claims and general unsecured claims, which, based on the results of the claims reconciliation process, may ultimately be materially different from the estimates in the Recovery Analysis. See footnote three of the Recovery Analysis, annexed hereto as Exhibit C. The Debtors believe that certain priority claims and general unsecured claims should be reclassified and/or disallowed as part of the claims reconciliation process. However, the Debtors cannot assure that such claims will ultimately be reclassified and/or disallowed. As such, the recovery for Class 4(a) could be as low as 6% if certain filed and unreconciled priority claims and general unsecured claims asserted against the Debtors are ultimately allowed as part of the claims reconciliation process.

Additionally, this range is not inclusive of unliquidated tort claims. Forty-four (44) claims related to unliquidated tort claims were filed against the Debtors, of which thirty-nine (39) claims are related to asbestos-related litigations and may be reduced by applicable insurance coverage. The Debtors do not currently have an estimate for such tort claims, and the recovery amount for general unsecured creditors may be lower depending on the ultimate value of the unliquidated tort claims. If the unliquidated tort claims are ultimately allowed and not paid by available insurance, recovery for general unsecured creditors could be even lower.

Global Settlement

Following entry of the Bidding Procedures Order, the Debtors entered into extensive negotiations with the Creditors’ Committee, the PBGC, the DIP Agent and DIP Lenders, and the Purchaser to resolve the Creditors’ Committee’s and the PBGC’s potential objections to the Sale Transaction. These negotiations resulted in a global settlement (the “Global Settlement”) by which the Creditors’ Committee and the PBGC consented to the Sale Transaction, subject to the terms of the Global Settlement, to the extent the Sale Transaction was consummated before September 27, 2020.

Under the Global Settlement, the Debtors and the PBGC mutually agreed to the termination of the Qualified Pension Plan and that the PBGC would assume sponsorship of that Pension Plan. The PBGC agreed to limit its claim against the Debtors and their estates to a general unsecured claim estimated to be no more than $225 million. In addition, the Purchaser agreed to assume sponsorship of the Cash Balance Plan as of the Closing Date pursuant to the amended Stalking Horse Agreement, which included a reduction in the purchase price of $1.6 million, the expected underfunding amount of the Cash Balance Plan. The PBGC agreed to support a chapter 11 plan where the first $5 million of amounts it would otherwise recover under the plan based on a pro rata distribution shall be waived and subordinated for the benefit of the Debtors’ other general unsecured creditors. 

Additional terms of the Global Settlement include:

• the Debtors agreed not to take on any action, or refrain from taking any action, to intentionally jeopardize the general unsecured creditor recoveries based on the Distributable Value Analysis (as defined in the Sale Order);
• the Debtors and the Creditors’ Committee agreed to work in good faith on a chapter 11 plan to facilitate, implement, and give effect to the Global Settlement;
• the DIP ABL Secured Parties agreed to reduce their recovery by $800,000;
• the Creditors’ Committee and each of its members agreed not to pursue any Challenge (as defined in the DIP Order) against the Prepetition Secured Parties or the DIP ABL Secured Parties;
• the Debtors, the Purchaser, the DIP ABL Secured Parties, and certain related parties agreed to waive and release causes of action under chapter 5 of the Bankruptcy Code;
• the Debtors agreed to pay the fees of the trustee to the unsecured notes;
• the Debtors agreed to escrow certain amounts as further security for repayment of fees, costs and expenses of the DIP Agent’s professionals during the Chapter 11 Cases; and
• the Creditors’ Committee’s professionals’ fee cap in the DIP Budget would be increased to $1.5 million a month.

Asset Sale

On September 15, 2020 and further to a September 15th sale hearing, the Court hearing the Briggs & Stratton Corporation cases issued an order approving the $550.0mn sale of the Debtors’ assets to Bucephalus Buyer, LLC, an affiliate of KPS Capital Partners, LP (the “Stalking Horse Bidder” or the “Buyer”) [Docket No. 898]. The Stalking Horse APA is attached to the bidding procedures order [Docket No. 505] at Exhibit D.

On August 31st, the Debtors notified the Court that, absent any further qualified bids beyond that of the Stalking Horse Bidder, an auction scheduled for September 1st had been cancelled and the Stalking Horse Bidder designated as the Successful Bidder for substantially all of the Debtors’ assets [Docket No. 679]. 

Key Dates:

• Plan Supplement Filing Deadline: December 4, 2020
• Deadline to File Objections to Confirmation of Plan: December 11, 2020
• Voting Deadline: December 11, 2020
• Plan Confirmation Hearing: December 18, 2020

Recovery Analysis and Liquidation Analysis (See Exhibits B and C of Disclosure Statement [Docket No. 1227] for notes)

About the Debtors

According to the Debtors: “Briggs & Stratton Corporation (NYSE: BGG), headquartered in Milwaukee, Wisconsin, is focused on providing power to get work done and make people’s lives better. Briggs & Stratton is the world’s largest producer of gasoline engines for outdoor power equipment, and is a leading designer, manufacturer and marketer of power generation, pressure washer, lawn and garden, turf care and job site products through its Briggs & Stratton®, Simplicity®, Snapper®, Ferris®, Vanguard®, Allmand®, Billy Goat®, Murray®, Branco® and Victa® brands. Briggs & Stratton products are designed, manufactured, marketed and serviced in over 100 countries on six continents.”

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