Gas engine manufacturer Briggs & Stratton (BGG) - Get Report said Monday it has entered into voluntary Chapter 11 bankruptcy protection and agreed to be sold to private equity firm KPS Capital for $550 million.
The news sent the stock tumbling 30% premarket Monday.
Briggs & Stratton has been exploring "multiple options" over the past several months, CEO Todd Teske said, but "the challenges we have faced during the Covid-19 pandemic have made reorganization the difficult but necessary and appropriate path forward."
KPS has acquired all of the company's assets and assumes certain customer, employee and vendor liabilities and would act as the stalking-horse bidder through a court-supervised sale process.
Separately, KPS also announced that it entered into an agreement in principle with the United Steelworkers of America union regarding a new collective bargaining agreement for Briggs & Stratton hourly employees.
"KPS is committed to the expeditious acquisition of Briggs & Stratton to provide certainty of outcome and confidence in the new company's future for all of its stakeholders, including customers, employees and suppliers," said Michael Psaros, co-founder of KPS.
However, the private equity group also said that the "new Briggs & Stratton" would be "conservatively capitalized and not encumbered by its predecessor's significant liabilities."
Briggs announced that it was able to secure $677.5 million in debtor-in-possession financing, with $265 million committed by KPS and the remaining $412.5 million coming from the company's existing group of lenders.
The DIP facility will ensure that Briggs & Stratton enough liquidity to continue normal operations, including the "timely payment of employee wages and health benefits" as it undergoes its restructuring.
Shares of Briggs & Stratton were down 29.18% at 55 cents in premarket trading.