Troubled B. Riley raises $236 million in sale of apparel, Brookstone brands

Struggling B. Riley Financial said Tuesday that it had sold its interests in its apparel and Brookstone brands for about $236 million — the second such asset sale in a month as it works to pay down debt related to a buyout deal that turned sour.

The Westwood-area financial services firm sold its Hurley, Justice and other apparel brands, as well as its interests in women’s clothing retailer Bebe and personal care company Brookstone, in two separate transactions to a joint venture of Hilco Global and TPG Angelo Gordon, the companies said.

Hilco Global is a diversified financial services firm based in Northbrook, Ill. TPG Angelo Gordon is a unit of TPG, an alternative asset manager based in Fort Worth and San Francisco.

B. Riley shares rose 12.8% to $6.35 on Tuesday.

Earlier this month, B. Riley sold a majority stake in its Great American appraisal and liquidation business in a nearly $400-million deal that earned the company $203 million in cash and left it with a minority stake valued at roughly $183 million in a new holding company it is forming with Oaktree Capital Management, the Los Angeles global investment manager that specializes in distressed assets.

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How one bad deal derailed this prominent L.A. financial services firm

How one bad deal derailed this prominent L.A. financial services firm

Oct. 2, 2024

The sales this month have netted the company more than $400 million in cash that will help pay down debt that B. Riley valued at roughly $1.9 billion in September, some of which stems from a $2.8-billion buyout last year of Franchise Group, a Delaware, Ohio, company that operates Vitamin Shoppe, Pet Supplies Plus and other retailers.

“With the completion of this transaction and the expected sale of a majority stake in Great American Group in late November, we are moving from a period of asset monetization to a renewed focus on growth in our core financial services operating businesses,” B. Riley founder and co-Chief Executive Bryant Riley said in a statement Tuesday.

B. Riley offers wealth management and financial services, but has made investments in consumer companies, starting in 2016 with legacy internet service provider United Online. The company through a partnership with Bluestar Alliance also repositioned the brands of faded apparel companies, including girls clothing brand Justice, now sold in Walmart.

The firm had seen its stock drop more than 90% since it underwrote the management-led buyout last year of Franchise Group, whose founder, Brian Kahn, has been tied to the collapse of Prophecy Asset Management, a hedge fund that federal prosecutors allege defrauded investors of $294 million.

B. Riley took on $600 million in debt to underwrite the deal and lent Kahn $200 million to establish and take Franchise Group private — with most of the loan secured by shares of Franchise Group. Riley said last month that the firm had lowered its debt related to the deal to about $380 million.

The Securities and Exchange Commission has issued subpoenas to B. Riley as it investigates the firm’s relationship with Kahn, 50, who resigned as CEO of Franchise Group but has not been charged with any crime and has denied any wrongdoing at Prophecy.

Riley, 57, has denied knowledge of any alleged wrongdoing at Prophecy. An outside law firm also concluded that neither he nor others at the financial services firm had involvement with or knowledge of any wrongdoing at Prophecy, which had offices in New York and South Carolina.

B. Riley said Tuesday that it had acquired the apparel brands, excluding Bebe and Brookstone, for about $222 million and received $179 million in distributions during its ownership.

B. Riley Financial was formed in 2014 by a merger of Riley’s privately held stock firm with Great American, which was public at the time and had flourished during the financial crisis, liquidating companies such as Mervyn’s.