Financial Firm B. Riley Plans Sale of Majority Stake in Great American Group
According to a report by Bloomberg, distressed financial firm B. Riley is looking to sell its majority stake in Great American Group in an effort to reduce its leverage and stabilize its business.
Shares initially surged almost 15% upon the news before leveling off alongside the broader market.
The Los Angeles-based company is currently in negotiations for the sale and has a non-binding financing agreement in place for its B. Riley and bebe brands.
It is expected that these transactions could generate $410 million, which B. Riley intends to use to reduce its debt with Nomura Holdings to $125 million by the end of 2024.
Bloomberg reports that B. Riley has been facing scrutiny from short sellers regarding its business practices and is grappling with managing $2 billion in debt, ongoing federal investigations into its financial reporting, and a significant loss in the second quarter.
The firm is under investigation by the SEC regarding its asset disclosures and dealings with former Franchise Group Inc. CEO Brian Kahn. Both Riley and Kahn have denied any wrongdoing, with B. Riley cooperating with the SEC.
In response to its financial challenges, B. Riley has recently cut its dividend to focus on debt reduction and plans to repay senior notes due in February 2025 through asset sales and available cash. The company also anticipates amending its credit agreement with Nomura.
Bloomberg notes that Chairman and Co-CEO Bryant Riley emphasized the company’s commitment to monetizing assets to expedite debt repayment.
Recent reports suggest that Oaktree Capital is in talks to acquire a stake in Great American, while B. Riley is engaging with lenders to discuss debt amendments.
Founder Bryant Riley has put forth an informal offer to privatize the company at $7 per share, with an independent committee currently evaluating the proposal.
B. Riley is also navigating a contentious $500 million loan facilitated by Nomura, backed by assets now facing potential write-downs of up to $370 million. This includes a loan to Kahn secured by Franchise Group shares.
Despite calls for reassessment, Nomura has yet to adjust the loan’s valuation.
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