LOS ANGELES - B. Riley Financial, Inc. (NASDAQ: RILY), a diversified financial services firm, announced today its intent to sell a majority stake in its Great American Group and secure financing for its brand portfolio, aiming to significantly reduce its debt by the end of 2024.
The company has entered into exclusive negotiations to sell a 53% interest in its appraisal, real estate, and solutions businesses, collectively known as Great American Group, at an enterprise value of approximately $380 million. This division is currently listed on B. Riley's books at about $35 million.
In parallel, B. Riley has committed to a debt financing arrangement for its B. Riley and bebe brands businesses. The transaction, expected to yield around $236 million, will be executed through a special purpose vehicle, collateralized by the brands' assets and non-recourse to B. Riley. The company acquired the brand portfolio for roughly $222 million and has seen $179 million in distributions, excluding those from bebe.
The combined proceeds from these transactions, estimated at $410 million, are primarily earmarked for reducing the Nomura Senior Secured Debt to about $125 million by year-end. B. Riley also plans to use cash on hand and other asset sales proceeds to address all 2025 maturities. These moves are projected to strengthen the company's balance sheet, with the next senior notes maturing in 2026, thereby enhancing its ability to focus on core businesses.
Chairman and Co-CEO Bryant Riley stated that monetizing these assets to expedite debt repayment aligns with the firm's focus on delivering for clients and partners in the small- to mid-cap market.
The company is also in the process of amending and restating its credit agreement with Nomura Corporate Funding Americas, LLC, with an announcement expected shortly.
Additionally, on August 15, 2024, Bryant Riley proposed to take the company private at $7.00 per share for the outstanding shares he does not own. A Special Committee of independent directors is evaluating this proposal, with no certainty that it will lead to a transaction.
B. Riley Financial provides a wide range of services, including investment banking, private wealth management, financial consulting, and more, through its subsidiaries and affiliates.
This news is based on a press release statement and includes forward-looking statements subject to risks, uncertainties, and assumptions. There is no guarantee that the planned transactions will be finalized or that the anticipated outcomes will be achieved.
In other recent news, B. Riley Financial, Inc. has been making headlines with its recent financial developments. The company reported a significant net loss in the range of $435 million to $475 million for the second quarter of 2024, attributed to non-cash impairment charges and write-downs. Despite these losses, B. Riley managed to maintain an operating adjusted EBITDA between $50 million and $55 million, demonstrating the resilience of its core businesses.
In a surprising turn of events, the firm's founder, chairman, and co-CEO, Bryant Riley, has proposed a buyout to take the company private. The offer involves purchasing all outstanding shares not already owned by Riley for $7.00 each. This proposal, which is currently under review by a Special Committee of independent directors, is not dependent on financing availability.
In a strategic move to strengthen its balance sheet, B. Riley has suspended its dividend and is reviewing strategic alternatives for Great American Group. These recent developments have been triggered by various factors, including a $28 million impairment charge for Targus, a $25 million charge related to deferred tax benefits, and a significant write-down of the Freedom VCM investment.
The company has also received SEC subpoenas related to dealings with Brian Kahn, the former CEO of FRG. Despite these challenges, B. Riley is refocusing on its core financial services business and is committed to maximizing value from its existing principal positions.
InvestingPro Insights
In light of B. Riley Financial's strategic moves to sell a majority stake in its Great American Group and secure financing for its brand portfolio, it's important to consider the company's financial health and market performance. According to the latest data from InvestingPro, B. Riley Financial has a market capitalization of approximately $162.99 million, indicating the size of the company in the financial services industry.
However, the firm's financial metrics show signs of struggle. With a negative price-to-earnings (P/E) ratio over the last twelve months as of Q1 2024, standing at -22.2, it suggests that the company has been unprofitable during this period. This is further supported by a gross profit margin of -1.24%, indicating that B. Riley has been facing challenges in maintaining profitability in its operations. Despite these challenges, the company has shown a commitment to its shareholders by maintaining dividend payments for 11 consecutive years, and the current dividend yield is remarkably high at 37.17%.
InvestingPro Tips also highlight that B. Riley's stock has experienced significant price volatility, which could be a point of consideration for potential investors. Additionally, the stock has seen a substantial return over the last week, which may catch the eye of those looking for short-term gains. For investors and analysts seeking a more comprehensive understanding of B. Riley Financial's performance and potential, InvestingPro offers additional tips and insights into the company's financials and market behavior.
It's worth noting that B. Riley Financial's strategic initiatives to reduce debt and strengthen its balance sheet are occurring against the backdrop of these financial metrics. The company's ability to navigate its current financial challenges will be crucial for its long-term success and its shareholders' interests. For a deeper dive into B. Riley Financial's market data and to access more InvestingPro Tips, interested parties can visit https://www.investing.com/pro/RILY.
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