8-K: B. Riley Financial Secures $160 Million Credit Facility, Issues Warrants to Oaktree Affiliates

B. Riley Financial, Inc. announced the closing of a $160 million credit facility and the issuance of warrants to purchase common stock to affiliates of Oaktree Capital Management, L.P.

Summary

• B. Riley Financial, Inc. and its subsidiary BR Financial Holdings, LLC entered into a credit agreement on February 26, 2025, securing a $125 million three-year term loan and a $35 million four-month delayed draw term loan.
• The initial term loan matures on February 26, 2028, or earlier if certain debt exceeds $10 million and is due within 91 days.
• The delayed draw facility matures on June 30, 2025.
• Proceeds from the initial term loan were used to repay existing debt, for working capital, and to cover transaction fees.
• The delayed draw facility will fund obligations related to the liquidation of JOANN, Inc. and for general corporate purposes.
• The credit facilities are secured by a first priority lien on the equity interests of the Borrower and its subsidiaries, and substantially all of the assets of the Borrower and the Guarantors.
• Interest rates for SOFR loans will accrue at the Adjusted Term SOFR Rate plus 8.00%, while Base Rate loans will accrue at the Base Rate plus 7.00%.
• A closing fee of 3.00% for the initial term loan and 2.00% for the delayed draw facility applies.
• An exit fee of 5.00% of the aggregate principal amount of loans repaid is required, unless the company's common stock price exceeds a certain threshold.
• The company issued warrants to Oaktree affiliates to purchase approximately 1,832,290 shares of common stock at an exercise price of $5.14 per share.
• The warrants contain anti-dilution provisions and could potentially be exercised for up to 19.9% of the outstanding shares of common stock.
• A registration rights agreement was also entered into, granting shelf and piggyback registration rights to the holders.

Sentiment

Score: 6

Explanation: The announcement is neutral to slightly positive. Securing financing provides stability, but the high interest rates and potential dilution from warrants temper the positive aspects.

Positives

• The credit facility provides B. Riley Financial with capital for working capital, general corporate purposes and to fund the liquidation of JOANN, Inc.
• Repaying existing indebtedness under the previous credit agreement simplifies the capital structure.
• The registration rights agreement provides liquidity options for warrant holders.

Negatives

• The credit facility includes relatively high interest rates (SOFR plus 8.00% or Base Rate plus 7.00%).
• The company is subject to closing and exit fees, including a 5% exit fee upon prepayment or repayment of the credit facilities.
• The issuance of warrants to purchase approximately 1,832,290 shares of common stock could dilute existing shareholders.

Risks

• The credit agreement contains covenants that limit the company's ability to incur additional debt, dispose of assets, and make certain investments.
• The company must maintain liquidity of at least $50 million (or $25 million if the outstanding credit facilities are less than or equal to $62.5 million).
• The warrants contain anti-dilution provisions that could potentially be exercised for up to 19.9% of the outstanding shares of common stock.
• The company's ability to meet its debt obligations is dependent on its financial performance and cash flow.

Future Outlook

The credit facility and warrants provide B. Riley Financial with capital and flexibility to manage its balance sheet and pursue strategic opportunities. The company's future performance will depend on its ability to execute its business plan and manage its debt obligations.

Industry Context

This announcement reflects ongoing activity in the financial services sector, where companies are actively managing their capital structure and seeking opportunities for growth and strategic positioning.

Comparison to Industry Standards

• Comparable companies in the financial services sector, such as Houlihan Lokey, Piper Sandler, and Cowen Inc., also utilize credit facilities and equity-linked securities as part of their capital management strategies.
• The interest rates and fees associated with the B. Riley Financial credit facility are within the range of industry standards for similar types of financing, but the specific terms depend on the company's credit profile and market conditions.
• The issuance of warrants is a common practice in the financial services industry, particularly for companies seeking to raise capital or incentivize investors.

Related Party Transactions

• The issuance of warrants to affiliates of Oaktree Capital Management, L.P. constitutes a related party transaction.

Stakeholder Impact

• Shareholders may experience dilution if the warrants are exercised.
• Employees may benefit from the company's increased financial stability.
• Customers and suppliers may see continued operations and service.

Next Steps

• The company will need to manage its debt obligations and comply with the covenants in the credit agreement.
• Oaktree affiliates will have the opportunity to exercise their warrants and potentially increase their ownership stake in the company.
• The company will need to monitor its stock price to determine if the exit fee on the credit facilities will be payable.

Key Dates