B. Riley Plans to Sell Assets to Raise Funds and Stabilize Business
B. Riley's Plan to Sell Stake in Great American Group
B. Riley, a financial firm currently facing difficulties, is reportedly planning to sell its majority stake in Great American Group. The aim of this sale is to decrease its leverage and bring stability to its business, as reported by Bloomberg. The news of this planned sale caused the company's shares to rise by nearly 15% in early trading before they fell in line with the broader market.
Non-Binding Financing Agreement and Potential Earnings
The Los Angeles-based company is presently in negotiations for the sale and has a non-binding financing agreement for its B. Riley and bebe brands businesses. These transactions could potentially generate $410 million. B. Riley intends to utilize these funds to decrease its debt with Nomura Holdings to $125 million by the end of 2024, as per Bloomberg.
Challenges Faced by B. Riley
B. Riley has been facing continuous criticism from short sellers regarding its business practices. The company is attempting to manage a $2 billion debt, federal investigations into its financial reporting, and a significant loss in the second quarter. The SEC is currently investigating the firm concerning its asset disclosures and transactions with Brian Kahn, the former CEO of Franchise Group Inc. Both B. Riley and Kahn have denied any misconduct, and B. Riley is cooperating with the SEC.
Debt Reduction and Repayment Plans
The firm recently had to reduce its dividend to concentrate on debt reduction. It plans to repay senior notes due in February 2025 through asset sales and available cash. B. Riley also anticipates amending its credit agreement with Nomura. According to Bloomberg, Chairman and Co-CEO Bryant Riley stated that the company is taking advantage of this opportunity to monetize assets to expedite debt repayment.
Stake Negotiations and Potential Privatization
Previous reports suggest that Oaktree Capital is negotiating a stake in Great American, and B. Riley is discussing debt amendments with lenders. Founder Bryant Riley has informally proposed to privatize the company at $7 per share, and a special committee of independent directors is currently reviewing this proposal.
Controversial Loan and Potential Write-Down
B. Riley is also dealing with a controversial $500 million loan arranged by Nomura, which is backed by assets now expected to be written down by up to $370 million. This includes a loan to Kahn secured by Franchise Group shares. Nomura has been urged to reassess the value of the loan but has not yet taken any action, as reported by Bloomberg.
Bottom Line
B. Riley's plan to sell its majority stake in Great American Group and other assets to reduce its debt and stabilize its business is a significant move. The firm is dealing with multiple challenges, including a large debt, federal investigations, and criticism from short sellers. It remains to be seen how these asset sales and other strategies will impact the firm's future. What are your thoughts on this development? Share this article with your friends and sign up for the Daily Briefing, which is available every day at 6pm.
