B. Riley pays $400M for Badcock receivables

MULBERRY, Fla. — B. Riley Financial has purchased W.S. Badcock’s credit receivable portfolio, entering a new business, while going a long way to help Franchise Group pay down debt, which includes $575 million in loans it took on to acquire the Top 100 company in November.

The publicly-held Franchise Group said it’s also looking to sell Badcock’s real estate portfolio and plans to complete the deal next year as it looks to reduce its debt by more than $1 billion.

B. Riley, a financial services and business consulting firm and also a public company, said it acquired the roughly $535 million portfolio through a subsidiary for about $400 million. Franchise Group, which has been moving deep into the furniture industry, acquired Mulberry, Fla.-based Badcock for about $580 million in an all-cash deal this past month.

“We acquired Badcock to add scale and synergy to our home furnishings franchise businesses,” Franchise Group CEO Brian Kahn said in a separate announcement. “I am pleased that we were able to efficiently monetize the Badcock consumer credit receivables.”

In addition to Badcock, FRG home furnishings holdings include American Freight Furniture, Mattress, Appliance and rent-to-own company Buddy Home Furnishings. It has rolled other furniture businesses into American Freight — the former FFO Home and FRG’s Sears Outlet business

Badcock, which operates about 383 stores credit-oriented furniture, electronics and appliance stores as Badcock Home Furniture & more, will continue to service the receivables portfolio and continue offering “flexible payment solutions and credit options to our customers,” Kahn said.

The sale and repayment of debt “are consistent with our commitment to a conservative financial policy as we continue to identify the highest and best uses of the company’s capital.” Franchise Group’s evaluation of options for Badcock’s real estate portfolio is ongoing. The company plans to complete that sale by the end of its fiscal 2022 second quarter and reduce net debt by about $1.1 billion by the end of 2022.

B. Riley said it intends to purchase additional receivables, subject to certain limitations and restrictions. In connection with this transaction, it established a new receivables business to provide debt monetization solutions and portfolio acquisition services, it said.

“This new division utilizes the company’s strong capital base and expert resources offered through its affiliates to preserve and maximize value for clients – including valuation services, restructuring and turnaround management, distressed debt and financial structuring,” it said.

 As of September 30, B. Riley had more than $5 billion in assets.

B. Riley Chairman and Co-CEO Bryant Riley called the Badcock transaction “a continuation of its “commitment to enable FRG’s success as a leading operator in the franchising sector. Utilizing our balance sheet to support our clients has been a proven driver of our ability to deliver for our shareholders. We intend to continue to pursue acquisitions and strategic investments with attractive risk-adjusted returns as a core part of our platform strategy.”

Clint Engel

Clint Engel is a veteran home furnishings industry journalist and executive editor of Home News Now. Please share your feedback with him at clint@homenewsnow.com

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