Briggs & Stratton Corporation -- Moody's downgrades Briggs & Stratton's PDR to D-PD following Chapter 11 filing
Rating Action: Moody's downgrades Briggs & Stratton's PDR to D-PD following Chapter 11 filing
Global Credit Research - 20 Jul 2020
Approximately $195 million of rated debt affected
New York, July 20, 2020 -- Moody's Investors Service, ("Moody's") downgraded Briggs & Stratton Corporation's ("Briggs & Stratton") probability of default rating (PDR) to D-PD from Ca-PD following the company's July 20, 2020 announcement that it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code[1]. Moody's also downgraded the company's corporate family rating ("CFR") to Ca from Caa3, and the senior unsecured debt rating (to C from Ca). The Speculative Grade Liquidity Rating (SGL) remains SGL-4. The ratings outlook was changed to stable from negative.
Briggs & Stratton has also obtained $677.5 million in DIP financing, with $265 million committed by KPS Capital Partners, LP ("KPS") and the remaining $412.5 from the company's existing group of ABL lenders. Briggs & Stratton also entered into a definitive stock and purchase agreement with an affiliate of KPS to acquire substantially all of the company's assets and assume certain liabilities, subject to higher bids from other potential purchasers.
"The downgrades reflect Briggs & Stratton's substantial earnings decline and inability to generate positive annual free cash flow which, exacerbated by the coronavirus outbreak, accelerated the company's missed interest payment and ultimately, bankruptcy filing," said Moody's Vice President, Gigi Adamo. "Absent the bankruptcy filing, the expiration of the missed interest payment grace period on the company's $195 million outstanding notes due December 2020 would have allowed noteholders to accelerate the payment of principal and accrued interest," Adamo added.
The following rating actions were taken:
Downgrades:
..Issuer: Briggs & Stratton Corporation
.... Probability of Default Rating, Downgraded to D-PD from Ca-PD
.... Corporate Family Rating, Downgraded to Ca from Caa3
....Senior Unsecured Regular Bond/Debenture, Downgraded to C (LGD5) from Ca (LGD4)
Outlook Actions:
..Issuer: Briggs & Stratton Corporation
....Outlook, Changed To Stable From Negative
RATINGS RATIONALE
The downgrade of the PDR to D-PD reflects the company's bankruptcy filing. The rating downgrades and change in outlook to stable reflects Moody's assessment of the expected loss rate for the unsecured notes and the corporate enterprise overall upon ultimate resolution of the default event.
Subsequent to today's actions, Moody's will withdraw the ratings due to Briggs & Stratton's bankruptcy filing. Please refer to the Moody's Investors Service Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.
The rapid spread of the coronavirus outbreak, deteriorating global economic outlook, low oil prices and high asset price volatility have created an unprecedented credit shock across a range of sectors and regions. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Today's actions reflect the impact on Briggs & Stratton of the deterioration in credit quality it has triggered given its exposure to the residential lawn care sector, which has left it vulnerable to shifts in market demand and sentiment in these unprecedented operating conditions.
The principal methodology used in these ratings was Manufacturing Methodology published in March 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1206079. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Headquartered in Wauwatosa, Wisconsin, publicly traded (NYSE: BGG) Briggs & Stratton Corporation 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 washers, lawn and garden, turf care and job site products. Engines are used primarily by the lawn and garden equipment industry. Revenue for the twelve months ended March 29, 2020 totaled $1.7 billion.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
REFERENCES
[1] Form 8-K (SEC) 20-Jul-2020
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Jadijhe (Gigi) Adamo Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Russell Solomon Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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