Franchise Group, the business at the center of a troubled control merger that has ruined B. Riley Financial’s investment, has filed for bankruptcy, but plans to continue operating most of its financial manufacturers, including Vitamin Shoppe.
On Sunday, the retailer filed for Chapter 11 bankruptcy protection, announcing that it already had a deal with roughly 80 % of its top secured loans that would allow them to change their debt to equity stakes and continue running the companies.
The company’s stores even include Pet Supplies Plus and Buddy’s Home Furnishings. Its third dealer, cheap furniture and equipment seller American Freight, may be closed. American Freight operates more than a few retailers in California, including shops in Torrance, West Covina and Palmdale.
Franchise Group listed assets and liabilities ranging from$ 1 billion to$ 10 billion. The filing does not use to franchise-owned shops.
Westwood-based B. Riley took the Delaware, Ohio, company private last year in a$ 2.8-billion management-led buyout that , turned disastrous , amid slowing sales for Franchise Group and a scandal involving ties between its founder, Brian Kahn, and Prophecy Asset Management, a hedge fund that federal prosecutors allege defrauded investors of$ 294 million. Kahn has denied any wrongdoing.
B. Riley underwritten the deal by taking on$ 600 million in debt, and over the years lent Kahn$ 200 million to form Franchise Group, which went private, with the majority of the loan secured by retailer shares. Bryant Riley, the co-chief professional and B. Riley leader, has denied knowing anything wrong, but a Securities and Exchange Commission analysis is being conducted into his business’s dealings with Kahn.
Riley,  , in a text Monday to people, said he felt “personally bored about this effect”, which will probably result in a loss of equity stakes in Franchise Group for the business and lots of B. Riley staff, as well as personal wealth clients and institutional investors.
He added that B. Riley is in “far better condition than people give us credit for” despite the decline in customer spending and the Prophecy incident never having been anticipated.
B. Riley has already announced that it would  , mark down its investment , in Franchise Group by up to$ 370 million and record a loss of up to$ 475 million when it files its second-quarter earnings, which it has yet to do.
Shares of B. Riley closed down 14 % to$ 4.92 Monday on the Nasdaq. Three years ago, the stock traded for close to$ 90.
Riley informed The Times in September that Riley’s business had reduced its debt in connection with the deal by about$ 380 million and had totaled$ 1.9 billion.
Since then, the financial services provider has sold off its resources to keep cutting its debts. By the end of the month, Riley said it anticipates that debts related to the Franchise Agreement will be reduced to$ 125 million.
B. Riley became the most highly damaged stock on the market as a result of the Franchise Group buyback, which meant investors were betting on the decline in the stock price. The debt processing, according to Marc Cohodes, a prominent short-seller in the business, just highlights how poor of a deal it was for B. Riley and other traders it attracted.
He blames the skeptics, according to Cohodes, rather than blaming himself for his insane deals where he allegedly enriched himself for the benefit of others. He added that he doubted the company’s ability to pay off its debt.
In September, B. Riley said it had sold a majority stake in its , Great American appraisal and liquidation , business for about$ 203 million to Oaktree Capital Management, while retaining a 47 % stake valued at roughly$ 183 million in a new holding company it formed with the L. A. distressed asset manager.
The company also sold off its its objectives in a number of clothing manufacturers and the , past store merchant Brookstone , for about$ 236 million.
A few days ago, it said it had sold off a small portion of its wealth management business to , Stifel Financial Corp.  , for up to$ 35 million in cash. Some 40 to 50 officials, along with the related customer transactions, are expected to move to Stifel earlier next time.
___
© 2024 Los Angeles Times
Distributed by Tribune Content Agency, LLC.
