(Bloomberg) — B. Riley Financial Inc., the money-losing investment and brokerage firm looking to reduce debt, agreed to sell a majority stake in its Great American Holdings business to funds managed by Oaktree Capital Management LP. Shares rose as much as 27% in New York trading.
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Terms of the deal call for B. Riley to receive about $203 million in cash and obtain 47% of the common units of a reorganized Great American, the companies said in a statement Monday. B. Riley also obtains 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 most troubled US retailers.
The deal could help B. Riley shore up its balance sheet as it struggles with a debt load that totaled about $2 billion as of mid-year. The company suspended its dividend in August to prioritize reducing leverage and recently renegotiated its key loan with terms that included paying down the balance and repaying a revolving line of credit.
B. Riley CEO Bryant Riley said the deal “will enable significant debt reduction while maintaining significant capital advantage in the business with a highly capable new partner that will enhance its future growth prospects.” .
B. Riley’s stock has plummeted in recent years as its investments deteriorated and U.S. authorities investigated some of its business dealings and disclosures. The Los Angeles-based firm missed the deadline to file its second-quarter financial statements, which are still pending. Riley and his company have said there has been no crime and that they are cooperating with authorities.
The stock rose $1.03 to $5.42 at 9:58 a.m. in New York and was trading as high as $5.59.
Moelis & Co. acted as exclusive financial advisor to B. Riley and Sullivan & Cromwell served as legal advisor. Wachtell, Lipton, Rosen & Katz acted as legal advisors to Oaktree.
(Updates with stock price from first paragraph).
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