by If your company begins with the letter “B,” there’s a decent chance it’s been in the news this week.
On Tuesday you read about the new strategy at Beyond. In the headlines today, the Big Lots sale to Nexus Capital Management that looked shaky a week ago now appears to be on track to close in early December. And on the other coast, B. Riley Financial amended its June 30 financials with a filing that has founding CEO Bryant Riley admitting to misreporting how many of his own shares he pledged to secure a line of credit from Axos Bank.
We’ll start in Delaware, where the auction for Big Lots took place Wednesday, attracting a lone competing bid that was deemed to be unqualified. That leaves only Nexus Capital, which overcame questions about its own financing for the deal raised a week ago to emerge the auction’s winner.
The bankruptcy court judge, J. Kate Stickles, earlier approved Gateway BL Acquisition, an affiliate of Nexus Capital, as the Stalking Horse bidder. Next, Big Lots will seek approval of the sale to Gateway at a hearing scheduled for 1:30 p.m. on Nov. 12. Based on rulings by and statements from the bankruptcy court judge, approval is highly likely. To the update from Nexus that funding had been secured, Stickles said it was “fantastic news.”
Objections to the sale now are due by 4 p.m., Nov. 6. This timeline should allow Nexus to close by its target date of Dec. 2 or Dec. 3. Separately, Big Lots continues to seek bids for its various leases, with a virtual lease auction now scheduled for 10 a.m., Nov. 7, with bids due the day before.
A week ago, Bloomberg reported that Nexus was still seeking the $750 million to $765 million needed to acquire Big Lots. A lot can happen in a week, because this week Nexus had the funding and the auction could proceed.
When announcing its bankruptcy on Sept. 9, Big Lots said it had secured $708 million in financing, including $35 million in new funds from current lenders, in the form of a post-petition credit facility.
Salt in the wound
The Nexus funding is a relief because at risk are thousands of jobs during what is about to become the holiday season. Big Lots has already announced plans to shutter 340 stores, including, rather sadly, those in Western North Carolina, an area still in the throes of devastation caused by Hurricane Helene a month ago.
According to court filings, A&G Real Estate Partners is entertaining bids on 255 Big Lots locations, a restructuring that continues during the auction bid process.
One of the big chains already identified as a leader in taking advantage of Big Lots leases is Ollie’s Bargain Outlet Holdings. Ollie’s just acquired eight more Big Lots leases to push its total to 15, according to a report in MarketWatch.
“These stores line up very well with Ollie’s in terms of size of the stores, lease terms, customer demographics, and are located in communities in our existing trade areas,” said Eric van der Valk, president at Ollie’s.
At the time of the bankruptcy filing, Big Lots had more than 1,000 stores in 48 states and an e-commerce platform.
Doh!
Meanwhile, checking in on another “B,” the boutique bank B. Riley, we see that its long-awaited Schedule 13D filing has finally posted. It’s got a few nuggets worth inspecting.
First, the filing includes Bryant Riley’s admission that he pledged 5.8 million shares to secure a $45 million revolving credit line from Axos in March 2019 rather than the $4.4 million he disclosed in company filings. The latter amount he had approval for; the former or higher amount he did not.
“This resulted in several inaccurate proxy statements and annual reports, with some dating as far back as 2020,” B. Riley Financial disclosed Wednesday. As of yesterday, the amount of principal and interest outstanding under the credit agreement was approximately $21 million.
Riley told Bloomberg that there “have been shorts whose sole goal is to get my shares sold out, so under-reporting collateral and my balance, which is down 45%, is clearly not in my best interest. That aside, I own the mistake.”
The correction means that, as the filing states, “certain of the company’s proxy statements and annual reports on Form 10-K understated the number of shares pledged in support of the [Axos] loan, including the company’s most recent proxy statement dated May 10 as well as prior proxy statements in 2020 and 2023 and Form 10-K amendments filed on April 29 and April 23, 2020.
The filing also reveals that the company’s audit committee had “recommended to the board that the company undertake certain remedial and personnel actions to ensure adherence to and accountability for the company’s policies and accurate disclosures of pledged securities in the company’s public filings.”
This is the committee that found “no involvement with, or knowledge of, any of the alleged misconduct” concerning Prophecy Asset Management on the part of Bryant Riley. After learning from news reports in November 2023 that longtime business associate Brian Kahn had been named as an unindicted co-conspirator in criminal charges against the former president and chief compliance officer of Prophecy, the audit committee retained outside counsel, Sullivan & Cromwell LLP, to conduct an internal review of Kahn’s dealings with B. Riley.
One footnote: B. Riley’s Schedule 13D filing on its very first line states that it supplements the June 30 filing from . . . 2014. Doh! That’s only a decade off! I know I’d have no problem investing in a company that gets its dates wrong by a decade in its own SEC filings published in order to correct previous mistakes. What could go wrong?
Also breaking this week was news that B. Riley had agreed to sell assets and intellectual property related to the licenses of several consumer brands, including bebe, Brookstone, Hurley, Justice, Scotch & Soda, Catherine Malandrino, English Laundry, Joan Vass, Kensie, Limited Too and Nanette Lepore.
The bundle of licenses sold in two separate deals nets B. Riley another $236 million to pay down debt, bringing its monthly total in cash raised to more than $600 million. The sale of the licenses comes on the heels of B. Riley’s announced sale of a controlling ownership stake in Great American, its GOB division, to Oaktree Capital Management for nearly $400 million.
B. Riley formed in 2014 when Bryant Riley’s privately held stock firm merged with Great American.
Acquiring the brands were a joint venture created by Hilco Global, a financial services firm, and TPG Angelo Gordon, a unit of TPG, an asset management company.
