Mon 07/20/2020 19:28 PM
Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing Motion
First Day Hearing Agenda
Bidding Procedures Motion
Briggs & Stratton Press Release
KPS Press Release
8-K


Briggs & Stratton, a Missouri- and Wisconsin-based producer of gasoline engines for outdoor power equipment and several affiliates filed chapter 11 petitions today, July 20, in the bankruptcy court for the Eastern District of Missouri, reporting $1 billion to 10 billion in both assets and liabilities. The debtors design, manufacture and produce power equipments under brand names, including the company’s own brands Briggs & Stratton, Simplicity, Snapper, Snapper Pro, Ferris, Allmand, Billy Goat, Hurricane, Murray, Branco and Victa (all registered trademarks) and other brands, including Craftsman and Husqvarna.


The debtors disclosed in an 8-K today, that they entered into a stock and asset purchase / stalking horse agreement, effective July 19, with Bucephalus Buyer LLC, a newly formed affiliate of KPS Capital Partners LP, to sell substantially all the debtors’ assets and equity interests in subsidiaries and joint ventures for a cash purchase price of $550 million (subject to purchase price adjustments) and the assumption of certain liabilities. According to the debtors’ bidding procedures motion, the stalking horse agreement with the KPS affiliate “contemplates a value-maximizing transaction pursuant to a going concern sale” subject to the submission of higher and better offers. The 8-K states that the parties expect to close the sale in the fourth quarter of 2020. The stalking horse agreement is attached as an exhibit to the bidding procedures motion and to the debtors’ 8-K filed today.


KPS has also agreed to provide a $265 million FILO tranche of the debtors’ DIP financing, with credit bidding rights. The proposed DIP financing totals $677.5 million, including the $265 million committed by KPS, and the remaining $412.5 to be provided by the company's existing group of ABL lenders, including a full rollup of the debtors’ of $326 million prepetition ABL facility.


The case has been assigned to Judge Barry Schermer (case No. 20-43597). The debtors are advised by Weil Gotshal as bankruptcy counsel, with Carmody Macdonald as co-counsel, Houlihan Lokey as investment banker and Ernst & Young as restructuring advisor. Kurtzman Carson Consultants LLC is the debtors’ claims and noticing agent.


The first day hearing has been scheduled for tomorrow, Tuesday, July 21, at 11 a.m. ET.


The company’s prepetition capital structure is shown below:

 



The company attributes the bankruptcy filing to “cautious ordering patterns from channel partners,” weather conditions, the bankruptcy of Sears (one of the company’s largest customers), shifts in consumer preferences, “unfair” Chinese trade practices and the impact of Covid-19, which when combined have led to a liquidity strain on the business and the need for capital to ensure the survival of the debtors business. The debtors’ financing efforts were further complicated by an upcoming maturity of the company’s unsecured notes and a springing maturity of the ABL facility if the notes are outstanding as of Sept. 15.

Background


Briggs & Stratton is the world’s largest producer of gasoline engines for outdoor power equipment and is also a leading designer, manufacturer and marketer of power generation, pressure washer, lawn and garden, turf care and job site products. The company began in 1908 in the automobile and parts manufacturing business, moved into providing power for agricultural and military applications and, as suburbia grew, entered the lawn and garden mower engine market. In recent years the company entered into the end-products business with a series of purchases.


In the early 2000s, Briggs & Stratton expanded into the global markets, opening manufacturing facilities in Chongqing, China, in 2005 and in Ostrava, Czech Republic, in 2006. Currently, 85% of the debtors’ products are designed and manufactured in the United States. The company markets and services its products in more than 100 countries on six continents through 40,000 authorized dealers and service organizations. The debtors have manufacturing facilities in Auburn, Ala.; Statesboro, Ga.; Poplar Bluff, Miss.; Wauwatosa, Wis.; and Chongqing, China. They also have a European regional office in Switzerland, a distribution center in the Netherlands, and sales and service subsidiaries in Africa, Asia, Australia, Europe, North America and South America. Parts distribution centers are in Menomonee Falls, Wis., and Wijchen, Netherlands.


The debtors operate in two segments, engines and products. In fiscal year 2019 the engines and products segments accounted for approximately 53% and 47% of the company’s revenue, respectively. Engines for residential lawn and garden equipment account for about 89% of sales, with the remaining 11% for primarily commercial applications. Sales in international markets, primarily Europe, accounted for about 30% of the engines segment net sales in fiscal 2019. The company also manufactures replacement engines and service parts for sales and service distributors, and owns a 38% equity interest in Power Distributors LLC, a joint venture with a national distribution network of service parts in the United States. The company’s remaining domestic distributors are independently owned and operated. Internationally, the company operates its own international distribution centers as well as using independent distributors.


The products segment designs, manufactures, and markets a wide range of outdoor power equipment, job site products and related accessories under in-house and other brands. The principal product lines include lawn and garden power equipment, turf care products, portable and standby generators, pressure washers, snow throwers and job site products. The company sells its products primarily through an independent dealer network. Internationally, the company relies on its worldwide distribution network and sales offices. The company’s manufacturing facilities are located in Sherrill, N.Y.; Munnsville, N.Y.; Wauwatosa, Wis.; Holdrege, Neb.; Lee’s Summit, Miss.; and Kemps Creek, Australia. The debtors intend to reduce operations in their Burleigh plant, which is part of the Wauwatosa campus, and on June 30 the company issued WARN act notices to approximately 220 employees.


According to the first day declaration filed by Jeffrey Ficks of Ernst & Young, the debtors’ financial advisor, in early 2020 the company Briggs developed a “Strategic Repositioning Plan” to reposition strategically and delever the company due to the upcoming December 2020 maturity of approximately $195.5 million in unsecured notes, the fact that the company’s ABL credit agreement provides for a springing maturity if the unsecured notes are outstanding as of Sept. 15, 2020, and the impact of the Covid-19 pandemic. Actions taken by the company to preserve near- and medium-term liquidity included plant shutdowns; the suspension of employee benefits; a reduction in capital and discretionary spending; the elimination of quarterly dividends; the suspension of a share repurchases program; the exploration of a sale-leaseback of company-owned real estate; a reduction in working capital through inventory management; and the potential divestitures of certain businesses and assets.


According to Ficks, the company’s ability to implement the strategic repositioning plan was “made unpredictable and challenging by COVID-19.” This impact included a drop of 8% in anticipated revenue for the 2020 fiscal third quarter, temporary plant shutdowns at six of the debtors’ U.S. facilities and negative impacts on customer and sales channels. The debtors estimate on a preliminary basis that they will have sales declines of $157 million for the fourth quarter and $197 million for the fiscal year.


In March and April 2020, the company hired Houlihan Lokey as investment banker to engage in a months-long capital raise process to address the company’s near term liquidity needs and the upcoming maturity of the unsecured notes. On April 27, the company amended the ABL credit agreement to relax certain financial covenants but also to add as an event of default that the company consummate a junior capital financing acceptable to the ABL lenders by June 15, which was subsequently extended to July 15. During this time, the debtors also sought, unsuccessfully, to negotiate a potential restructuring with an ad hoc group of unsecured noteholders represented by Gibson Dunn and Imperial Capital.


After conducting its outreach efforts, Houlihan advised the company that potential investors were unwilling to provide sufficient capital due to the upcoming maturity of the unsecured notes and preferred to proceed with an asset purchase in chapter 11. Ultimately, the company and its advisors determined that the only viable option was to proceed with a chapter 11 asset sale, and on July 19, 2020, the company entered into the stalking horse purchase and sale agreement with KPS.


On June 15, 2020, the company elected not to make interest payments of approximately $6.7 million on the unsecured notes due on June 15, 2020, to preserve liquidity. The company’s failure to make the interest payment prior to the expiration of the grace period on July 15, 2020, constituted an event of default under the indenture governing the unsecured notes.

Exmark Litigation


On May 12, 2010, Exmark Manufacturing Co. Inc., or Exmark, filed a patent infringement lawsuit against Briggs & Stratton Power Products Group LLC, or BSPPG. On Dec. 20, 2018, judgment was entered against BSPPG in the amount of $14.4 million in compensatory damages, $14.4 million in enhanced damages, $6 million in pre-judgment interest, post-judgment interest from after Dec. 19, 2018, and costs to be determined. The company filed a notice of appeal to the Federal Circuit on May 14, 2019, oral argument on the appeal took place on May 5, 2020, and the parties are currently awaiting a decision. In connection with the judgment the company and surety Fidelity and Deposit Co. of Maryland & Zurich American Insurance Co. posted a supersedeas bond of about $34.7 million for which the company and Fidelity are jointly and severally liable; however, Fidelity will not be liable for any judgment amounts in excess of the bond.

Employee-Related Liabilities


The company has obligations outstanding under various benefit plans for both current and former employees. The company sponsors two qualified defined benefit pension plans in the United States, the Briggs & Stratton Corp. Pension Plan and the Briggs & Stratton Corp. Cash Balance Retirement Plan. The pension plans are closed to new entrants, and benefits have been frozen for all participants since Dec. 31, 2013. The company paid annual premiums to the Pension Benefit Guaranty Corp. in April 2020 of approximately $3.1 million. According to a Mercer report dated July 14, 2020, as of June 30, 2020, the pension plans are underfunded by $176 million, based on estimated projected obligations of $956.5 million and estimated value of assets of $780.5 million.


The company also sponsors several other plans, which are as follows:

 
  • Key Employee Savings and Investment Plan. An unfunded, nonqualified plan that supplements the company’s 401(k) savings plan for certain key employees. The company has entered into a “rabbi trust” with Wells Bank NA, whose assets total approximately $8.1 million, which the company has been advised are subject to creditor claims under the terms of the trust.

     

  • Supplemental Executive Retirement Plan and Supplemental Employee Retirement Plan. Unfunded, nonqualified plans that supplement benefits under the qualified pension plan for certain key employees. As of June 30, 2020, the estimated projected benefit obligation was $65.3 million.

     

  • Retiree Welfare Plans. Provides medical, dental, vision and/or life insurance benefits for certain retired union and non-union employees. The estimated projected benefit obligation as of June 30, 2020, was $50.6 million. The company terminated the retiree welfare plans on July 19, 2020, and has filed a motion with the bankruptcy court seeking approval of the termination and related relief, as discussed below.



About 520 employees of the company’s employees at their Milwaukee locations are represented by a union and covered by an expired collective bargaining agreement, or CBA. The debtors intend to reduce operations at their Burleigh plant in the next few months and estimate that by December 2020 only 300 employees will be covered by the expired CBA.


The debtors corporate structure is shown below:

 

 

The debtors' largest unsecured creditors are listed below:

 
















































10 Largest Unsecured Creditors
Creditor Location Claim Type Claim Amount
Wilmington Trust NA Minneapolis Unsecured

Notes
$    195,462,000
MuniStrategies LLC

Muni Strategies Sub- CDE#24 LLC
Jackson, Miss. New Market

Tax Credit

Financing
12,275,000

(338,250 secured)
DV Community Investment LLC

DVCI CDE XXXIV LLC
Phoenix New Market

Tax Credit

Financing
7,760,000

(225,000 secured)
Zhejiang Zhouli Industrial Co. Zhejiang, China Trade 4,941,699
Sears, Roebuck & Co.

Bankruptcy
St. Paul, Minn. Litigation 3,816,056
SunTrust Community Capital LLC

Statesboro Ivestment Fund LLC

CDE XXXVIII LLC
Atlanta New Market

Tax Credit

Financing
3,500,000

(36,094 secured)
American Honda Motor

Co. Inc.
Torrance, Calif. Trade 3,250,478
Jiangsu Jianghuai Engine Co. Ltd. Yancheng, China Trade 3,058,526
Hydro-Gear LP Chicago Trade 2,694,164
Starting USA Corp. Poplar Bluff, Mo. Trade 2,553,100


The case representatives are as follows:


 




















































Representatives
Role Name Firm Location
Debtors' Co-Counsel Ronit J. Berkovich Weil, Gotshal

& Manges
New York
Debora A. Hoehne
Martha E. Martir
Debtors' Co-Counsel Robert E. Eggmann Carmody

MacDonald
St. Louis
Christopher J. Lawhorn
Thomas H. Riske
Debtors' Corporate

Counsel
Patrick G. Quick Foley &

Lardner
Milwaukee
Debtors' Investment

Banker
Reid Snellenbarger Houlihan

Lokey
Chicago
Debtors' Restructuring

Advisor
Jeffrey Ficks Ernst &

Young
Chicago
Debtors' Tax Conulstant Eric Kulju Deloitte

& Touche
Milwaukee
Co-Counsel to JPMorgan

Chase Bank, as

Prepetition ABL Agent

and DIP Agent
Peter P. Knight Latham &

Watkins
Chicago
Jonathan C. Gordon
Co-Counsel to JPMorgan

Chase Bank
David M. Unseth Bryan Cave

Leighton

Paisner
St. Louis
Brian C. Walsh
Counsel to Wilmington

Trust, N.A., as Sucessor

Unsecured Notes

Indenture Trustee
Seth H. Lieberman Pryor

Cashman
New York
David W. Smith
Debtors' Claims Agent Evan Gershbein KCC Los Angeles

DIP Financing Motion


The debtors’ proposed $677.5 million DIP financing will consist of two postpetition financing facilities. The DIP financing motion also provides for the consensual use of cash collateral. The two facilities are an asset-based revolving credit facility of up to $412.5 million, funded by JPMorgan and the debtors’ other incumbent lenders, and a superpriority senior secured, priming last-out term loan facility of up to $265 million committed by KPS. The ABL cap will reduce to $350 million upon funding of the DIP term loan. The ABL facility has three components: a North American revolving commitment of $383.7 million, reducing to $321 million on the term loan closing date; a Swiss revolving facility of $28.8 million; and a letter of credit sublimit of $6 million ($4 million as to the North American exposure and $2 million as to Swiss exposure). Interim availability under the facilities would be $158 million under the ABL facility (with $137 million under the North American revolver and $21 million under the Swiss revolver) and an interim draw of $20 million from the term facility.


The facilities would mature on the earlier of nine months following the petition date and the effective date of a plan of reorganization. Interest would accrue on the ABL borrowings under the DIP facility at an per annum rate of L+3.5%, with a 1% LIBOR floor, and on borrowings under the DIP term loan facility at a per annum rate of L+7%, with a 1% LIBOR floor. The DIP financing also includes an unused line fee of 0.25% (applicable only to the undrawn amount of the interim draw during the interim period), letter of credit and fronting fees of 0.125% per annum on annual basis, a term loan closing fee of 2% of aggregate principal amount, and additional fees as set forth in a fee letter filed under seal, as well as reasonable and documented professional fees and expenses incurred by the prepetition ABL agent and lenders.


To secure the DIP financing, the debtors propose to grant liens on a collateral package as defined in the proposed DIP orders, which have yet to be filed. Certain Briggs & Stratton international subsidiaries would be guarantors under the proposed DIP facility.


The proposed DIP financing provides for a full rollup of the prepetition ABL obligations upon entry of a final order. The DIP term loan facility also provides for a 101% hard call premium, unless the facility is prepaid with the proceeds of a qualified sale to the stalking horse. The debtors will be subject to the financial covenants of $22.5 million of aggregate ability during the interim period and $30 million after the interim period, as well as to comply with certain DIP budget covenants.


In support of the proposed DIP financing, the debtors filed the declaration of Houlihan Lokey Director Jeffrey Lewis, who states that, as described more fully in the debtors’ first day declaration, various operating pressures and the upcoming springing maturity of certain notes under the debtors’ current ABL facility.


Lewis delineated the debtors’ need for DIP financing to fund “approximately $110 of operating expenses” expected during the first four weeks of the debtors’ chapter 11 cases, including payments under first day motions and professional fees, which are necessitate the “immediate infusion of liquidity” and use of cash collateral in order to continue operations, to “avoid administrative insolvency, and to implement a global restructuring transaction that will preserve Briggs & Stratton’s going concern value for the benefit of all stakeholders.”

Adequate Protection


Subject to the provided carve-out, the company proposes the following adequate protection to its prepetition lenders: adequate protection liens to the extent of diminution in value on all DIP coppatera; allowed superpriority administrative claims (subordinate only to DIP superpriority claims, the carve-out and certain payments under the stalking horse agreement). The proposed adequate protection also includes reporting requirements and the reimbursement of reasonable and documented agent and lender professionals’ fees and expenses, as noted above.


Subject to entry of a final order approving the DIP financing, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).


Also, the proposed DIP financing provides for a waiver of the automatic stay to allow the DIP and prepetition secured parties to exercise rights and remedies to their collateral, subject to five business days notice and a hearing, and to curtail the extension of further loans and use of cash collateral upon an event of default under the DIP facility.


As to credit-bidding in connection with the sale of the debtors’ assets, credit bids must include cash to pay the DIP ABL facility and consideration to pay approved stalking horse bid protections.


The proposed DIP financing currently provides for a carve-out for fees owed to the office of the U.S. Trustee, chapter 7 trustee fees up to $50,0000 and, subject to entry of a final DIP order, professional fees of up to $4 million to debtor professionals (exclusive of success and transaction fees), up to $200,000 for professionals of any official committee of unsecured creditors and $15 million to debtor professionals (inclusive of success and transaction fees). Further, the challenge period for any UCC is 60 days following appointment of the committee and 75 days following entry of the interim DIP order for any other party.

DIP Budget


The proposed budget for the use of the DIP facility is HERE.

DIP Milestones


The DIP financing is subject to the following milestones:

 
  • July 25 (5 days following petition date): Entry of order approving interim DIP financing;

     

  • Aug. 25: Entry of order approving bidding procedures;

     

  • 40 days following entry of interim DIP order: Entry of final order approving DIP financing;

     

  • Sept. 15: Commencement of auction (unless no other qualified bids are submitted);

     

  • Sept. 25: Entry of the qualified sale order; and

     

  • Nov. 19 (or Dec. 31 upon a failure of certain closing conditions relating to domestic and international antitrust and foreign investment law ): Consummation of the qualified sale.

     

Bidding Procedures Motion


The debtors have entered into a stalking horse purchase agreement with Bucephalus, an affiliate of KPS, as the stalking horse bidder. The agreement contemplates a going-concern sale of substantially all of the debtors’ assets, including avoidance actions; equity interests in nondebtor foreign subsidiaries; and certain joint venture equity interests held by the debtors. The purchase price is approximately $550 million in cash (subject to certain adjustments), plus certain assumed liabilities. The adjustments are based on the amount of cash and debt load held by the debtors’ subsidiaries, the value of certain letters of credit, the amount of any credit bid and assumed liabilities. The latter include all liabilities related to under contracts transferred to the buyer, excluding tax liabilities, and cure costs for such contracts in an amount up to $5 million.

The agreement provides for a breakup fee of 3%, or $16.5 million, and payment of Bucephalus’ reasonable costs and expenses up to $2.75 million, payable as administrative expenses junior only to the DIP carve-out. Bucephalus’ bid is subject to overbids of the sum of the stalking horse, termination and expense reimbursement payments, plus $1 million.


The stalking horse bidder can terminate the stalking horse agreement if the following milestones are not met:

 
  • Aug. 25: Deadline for entry of the bidding procedures order;

     

  • Sept. 12: Deadline for submitting a qualified bid, as set forth in an approved bidding procedures order;

     

  • Sept. 15: Deadline for the debtors to hold an auction;

     

  • Sept. 25: Deadline for entry of the sale order; and

     

  • Nov. 19: Sale closing deadline.

     


The debtors propose the following “key” sale-related dates and deadlines:

 
  • Aug. 11: Bidding procedures hearing;

     

  • Aug. 13: Deadline for debtors to file and serve executory contracts and unexpired leases schedule, proposed cure costs and stalking horse bidder’s adequate assurance information;

     

  • Aug. 27 at 6 p.m. ET: Deadline to object to proposed cure costs, assumption and assignment of executory contracts and unexpired leases to stalking horse bidder and stalking horse bidder’s adequate assurance of future performance;

     

  • Aug. 28 at 6 p.m. ET: Bid deadline;

     

  • Aug. 31 at 6 p.m. ET: Deadline for debtors to file auction-cancellation notice and designation of stalking horse bid as successful bid if no qualified bid is received;

     

  • Aug. 31 at 6 p.m. ET: Deadline for debtors to notify bidders of status as qualified bidders and selection of baseline bid(s) for the auction;

     

  • Sept. 1 at 10 a.m. ET: Auction, if any;

     

  • Sept. 3 at 6 p.m. ET: Deadline for debtors to (i) file notice of auction results and designation of successful and backup bids and (ii) if stalking horse bidder is not the successful bidder, (a) provide contract and lease counterparties with adequate assurance information for successful bidder and (b) provide notice to contract and lease counterparties of contracts and leases designated for assumption and assignment to successful bidder;

     

  • Sept. 8 at 6 p.m. ET: Sale objection deadline; and

     

  • Sept. 11 at “[●]:[●] [a/p].m.”revailing Central Time): Sale hearing.

     

Motion to Approve Termination of Retiree Benefits


The debtors have also filed a motion seeking bankruptcy court approval of the prepetition termination of the debtors’ retiree group insurance plan, which they state “provides for and governs” all retiree health and welfare benefits for eligible retired employees, including medical, dental, vision and prescription drug benefits, health savings accounts and life insurance. The debtors argue that because they terminated the plan as a “proper exercise” of their contractual rights, Bankruptcy Code section 1114 does not apply to the termination. In the alternative, the debtors argue that if section 1114 does apply, the balance of the equities supports termination.


The debtors state that they terminated the plan because the stalking horse bidder was unwilling to assume retiree obligations, the debtors have limited cash resources and the ongoing sale process will be followed by a chapter 11 plan of liquidation and dissolution. According to the debtors, the premiums and costs associated with the underlying insurance policies total approximately $650,000 each month and the policies have a total unfunded status of approximately $50 million. Coverage under the plan will not cease until Aug. 31, 2020, they state.


The debtors further argue that reinstatement of the plan would “make it more difficult, if not impossible, for the Debtors to develop and confirm a chapter 11 plan, as it is uncertain at best whether the Debtors will have over $50 million in remaining assets after payment of secured, administrative, and priority creditors.” They state that any payments in connection with the plan “would necessarily come directly out of the recovery to other general unsecured creditors.” They also warn that failure to grant their requested relief, “could … lead to a conversion of the Debtors’ cases to cases under chapter 7.”


The debtors also argue that the appointment of a retiree committee would be futile. According to the debtors, since the sale of substantially all of the debtors’ assets is to be followed by liquidation, “it is not feasible for the Debtors to interact meaningfully with a retiree committee in the way anticipated by the statutory language.” The debtors add that “the only feasible proposal to make to a retiree committee would be the elimination of all benefits under the Retiree Group Insurance Plan, which is exactly the action the debtors’ board of directors has already taken.”

Motion to Settle Antitrust Class-Action Claims


Debtor Briggs & Stratton Corp. filed a motion to approve a class-action settlement with Cantera Gas Co. LLC, CMS, Energy Corp. and CMS Energy Resource Management Co., or collectively CMS3. The debtor is a named plaintiff and class member in a consolidated antitrust class-action proceeding in the Western District of Wisconsin. The debtor asserts that CMS3 and other defendants manipulated the prices of natural gas sold to industrial and commercial users in violation of Wisconsin state antitrust laws from early 2000 through at least October 2002. The debtor states that the scheme was carried out by falsely reporting prices to trade publications that generated and published natural gas price indexes, distorted and artificially inflated the prices paid for natural gas.


After more than a decade of litigation as part of a multidistrict litigation in the District of Nevada, the debtor and other plaintiffs reached a settlement with CMS in the amount of $15 million on March 4. According to the debtor, there have been no objections to the settlement, and the Western District of Wisconsin has scheduled a final approval hearing on Aug. 6, 2020. The debtor expects that its portion of the settlement will be approximately 2%.

Other Motions


The debtors also filed various standard first day motions, including the following:

 
  • Motion for joint administration

    • The cases will be jointly administered under case No. 20-43597.


  • Motion to establish trading procedures
    • The debtors seek entry of interim and final orders to establish trading procedures for the debtors’ common stock to protect the potential value of the debtors’ carryforwards of disallowed business interest expense (approximately $82 million as of the petition date), carryovers of unused general business credits (approximately $28 million), NOLs (approximately $17 million), carryovers of unused foreign tax credits and certain other tax benefits.


  • Motion to pay employee wages and benefits
    • The debtors seek interim and final orders authorizing them to pay employee wages, benefits and supplemental workforce obligations. The debtors seek to pay about $11.9 million in prepetition obligations on an interim basis and about $25.6 million on a final basis.

    • The debtors also seek to terminate the company’s deferred compensation plans for officers and key employees. The debtors state that deferred compensation, including postpetition earnings, will be recoverable as a general unsecured claim, thereby “inequitably lower[ing] participants’ effective compensation, putting participants’ compensation at risk, jeopardizing morale and putting chapter 11 administration at risk.


  • Motion to maintain prepetition customer programs
    • The debtors seek entry of interim and final orders authorizing them to maintain and make payments under the debtors’ customer warranty programs, tiered discount programs, customer rebate programs, customer incentive program, credit cards and other payment processors. On account of such programs the debtors seek to pay approximately $10.3 million on an interim basis and $53.2 million on a final basis.


  • Motion to pay taxes and fees
    • The debtors seek entry of interim and final orders authorizing the payment of certain prepetition taxes, fees and related obligations. The debtors estimate that they owe $4.21 million in prepetition taxes and fees, including $862,000 that will come due within 30 days of the petition date.


  • Motion to pay critical vendors
    • The debtors seek entry of interim and final orders authorizing them to pay certain vendors, suppliers and service providers (including foreign vendors and 503(b)(9) claimants) that are “critical” to maintaining the debtors’ going-concern value. The debtors seek to pay approximately $21.1 million on an interim basis and $35 million on a final basis.


  • Motion to pay certain prepetition lien claimants
    • The debtors seek authorization to pay about $3.5 million in shipping, warehouse and import and export charges, of which approximately $2.95 million will come due within the first 30 days of the debtors’ cases.

    • The debtors also seek authority to pay about $3.75 million of other lien claims, of which approximately $2.5 million will come due within the first 30 days of the debtors’ cases.


  • Motion to use cash management system
    • The company has bank accounts with Bank of America NA, JPMorgan Chase Bank NA, U.S. Bank NA, Bank of Montreal, BMO Wealth Management and SunTrust Community Capital LLC.


  • Motion to maintain insurance programs
    • The debtors seek entry of interim and final orders permitting them to maintain all insurance policies and programs, the surety bond program, to pay all related prepetition or postpetition obligations and to lift the automatic stay to permit employees to proceed with claims under the workers’ compensation program. As of the petition date, the debtors have posted in connection with surety bonds cash collateral of approximately $14.4 million and letters of credit of approximately $36.8, million. The debtors estimate that as of the petition date there are approximately $6.3 million in known, unresolved workers’ compensation claims.


  • Motion to provide utilities with adequate assurance
    • The debtors seek entry of interim and final orders authorizing them to make an adequate assurance deposit of approximately $907,505. The debtors spend about $1.8 million monthly on utility services, of which an estimated $750,000 remains outstanding.


  • Application to appoint claims agent / order
    • The debtors seek to employ Kurtzman Carson Consultants LLC as claims and noticing agent.


  • Motion to extend time to file schedules
    • The debtors seek authority extending the time to file their schedules and statements of financial affairs through Aug. 18.


  • Motion to establish case management procedures



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