(Bloomberg) - B. Riley Financial Inc., the money-losing broker-dealer and investment firm looking to cut debt, agreed to sell a majority stake in its Great American Holdings business to funds managed by Oaktree Capital Management LP. The shares surged as much as 27% in New York trading.
Terms of the deal call for B. Riley to receive about $203 million in cash and get 47% of the common units of a reorganized Great American, the companies said in a statement Monday. B. Riley also gets preferred units initially valued at $183 million. Oaktree, known for investing in distressed companies, will own a 53% common stake in Great American, which handles appraisals, valuations and liquidations and has worked with some of the biggest troubled US retailers.
The deal could help B. Riley bolster its balance sheet as it wrestles with a debt load that totaled about $2 billion at midyear. The company suspended its dividend in August to put a priority on cutting leverage, and recently renegotiated its key loan with terms that included paying down the balance and terminating a revolving credit line.
B. Riley Chief Executive Officer Bryant Riley said the deal “will enable meaningful debt reduction while retaining significant equity upside in the business with a highly capable new partner that will increase its future growth prospects.”
Shares of B. Riley have tumbled in recent years as its investments soured and US authorities probed some of its business deals and disclosures. The Los Angeles-based firm missed a deadline for filing its second-quarter financial statements, which are still pending. Riley and his company have said there’s been no wrongdoing and they’re cooperating with authorities.
The stock climbed $1.03 to $5.42 at 9:58 a.m. in New York and traded as high as $5.59.
Moelis & Co. served as the exclusive financial adviser to B. Riley, and Sullivan & Cromwell was legal adviser. Wachtell, Lipton, Rosen & Katz served as legal adviser to Oaktree.
By Steve Dickson
