Once again B Riley has negotiated to have terms of their debt terms changed to extend the time available for filing financial statements. The company could have been found in default on some loans because they have not filed within the 45 day covenant limit after the end of the quarter.
The company had received a notice from NASDAQ for not timely filing the financials.
This is a real mess and one short seller mentioned that baby bonds would go to zero if the company files chapter 11 since assets are pledged for more senior securities. Extreme caution is necessary with this mess.
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This is definitly an III success story for me. I first found about about RILY on this site and first heard about the Wolfpack Research report on this site. I knew of Cohodes from VRX and also Silvergate I was involved in both before he showed up.
Selling calls on RILY has been great since November.
Just waiting for another of these absurd short squeezes in RILY to sell more CALLs. Let’s hope there are a few more squeezes left in this baby.
One issue that I have is that Eagle Point Credit use their investment banking services on pref and baby bond offerings. IMO this is a bad look for Eagle Point and I have written to their IR on this topic. Encourage others to email portfolio companies doing business with RILY and ask why they are doing business with a firm that has been subpoenaed by the SEC.
Maybe because the eagle is really a snake. Cobra!
Could be! I made the point in the email that an executive team is judged by the company they keep… So we will see what happens.
My sense is that RILY will cease to exist and the point will become moot, but time will tell.
AW appreciate the comments. I own some EIC BB and wasn’t aware that the parent did business with Riley. I really enjoy Tim’s site and what people share. The earlier post about PSB preferred caused me to do a quick search. I’ve had an interest in preferred delisted or regulated to the pink sheets. I had considered these but they were not term preferred. Found the original 2.73B loan was done by a consortium of BOA, Citi, Barclays, and MS. Today it was in the news Berkshire has been selling its position in BOA.
I thought to myself I’m lucky I only hold one MS preferred.
The fallout from commercial RE is going to continue.
If you look at the prospectus of BB i would imagine that RILY were involved in the listing. Also – if you listen to the Eagle Point con calls a RILY “analyst” asks questions (typically stupid questions…) it is just too cozy of a relationship for my liking. I am definitly bias against RILY, but I have a considerable position in Eagle Point Credit prefs.
My concern (just a theory no proof…) here is that the RILY wealth management group is stuffing widow and orphan accounts with Eagle Point BB and Prefs. I do not like this, and management of Eagle Point should not be associated with it.
Anyway – my preference is that they sever the relationship, and have express same.
The first investigation by the SEC was closed and no wrong doing. Better be careful selling your calls , if Rily does pull off a restructuring of debt there will be a short squeeze.
That would be short squeeze number 10+++ – I have lost track of the “short squeezes” in this name since my involvment in November…
Somehow I think I will be ok.
On 8/12 the company admitted that they had been subpoenad by the SEC. This was a con call that took 12 mins and had questions.
Well here in America ‘you’re presumed innocent until proven guilty’. At most there maybe a civil find but the SEC over the years is very fledging finding fraudulent guilt even thought by the average Joe perspective fraud is every where.!
.Unfortunately most people think by association there is guilt. If you look at the bond holders they are not selling? Since your selling ‘calls ‘ I assume you are a holder unless they are ‘ naked call’…Very risky!
PaydayInvestor,
Thanks for the news flash on the presumption of innocence. I will write that down for future use for time when it is relevant. Sadly, it is irrelevant to any discussion about RILY.
What is highly relevant is the Cockroach Theory of Investing. When you see a cockroach – you should sell because there is certain to be another. The general idea is to avoid owning garbage. RILY certainly has displayed a never ending abundance of cockroaches.
You have used the word “fraud” in your post, I did not use it in mine. Nor have I ever used the word “fraud” to describe RILY. I did say that they are under subpoena by the SEC which RILY management has admitted. This is a matter of fact.
Being under subpoena by the SEC is a cockroach – to use the analogy – and has implications. At least as I am concerned – see Cockroach Theory.
You seem to be very concerned about any short call options that might be in my account. I am not short RILY calls at the moment, but certainly will be if we get another of these absurd “short squeezes”. You need not worry – I am very comfortable with the risk/reward as it pertains to my account of being short RILY CALLs and also being short the stock. In fact, the biggest problem with RILY is that it impossible to be short enough of it. While I am comfortable being short RILY call options, I would not be comfortable (at all) with ANY long position at and level of the RILY capital structure (stock, prefs, notes or bank loans).
Lastly, you have made a statement about bond holders and you seem to think that they are somehow not selling. All you have to do is look at a chart of RILYM (the near in maturity note) to see that RILYM holders have, in fact, bee very aggressive sellers. Down 9.33% today, trades 70% of par and I personally think the recovery value in a BK is at most 40% – so there is more downside to go.
Good luck to you.
“ask why they are doing business with a firm that has been subpoenaed by the SEC.”
Just to be clear, Goldman Sachs, JP Morgan, Bank of America, Wells Fargo and many others have also been subpoenaed by the SEC. If Eagle Point excluded every bank that’s been subpoenaed by the SEC, they wouldn’t be left with many options.
Thanks for the clarity.
Let me be equally clear… if you are unable to differentiate between B Riley and JP Morgan then I don’t know what planet you are living on.
Eagle Point Credit invest in credit instruments. I am reminded of the 5Cs of credit of which Character is first. I expect C Level execs at credit focused companies to be able to assess Character first and foremost. If they can’t that is an issue and B Riley has a Character problem (at a minimum).
As to alternatives to B Riley – there have been several BB and Pref issues sold by small and micro cap firms lately posted on this very site. Many were in the mREIT space (as an example) which I assume to be close enough to CLO equity. Plenty of these firms did not use B Riley investment banking services in their offerings. B Riley does not have a monoploy and I expect excellent excutive teams to know this.
When I see this kind of stuff, it makes me happy I’m loaded up on utility preferreds.
I’m curious when (feel like it’s a “when”, not “if”) they’ll stop paying the preferred dividends. Maybe next quarter.
Most are valuing the preferred on the $7 potential buyout where the preferred shares can be converted to common on a buyout worth $14 and change if a $7 / common share deal could be executed.
Hopefully no one is long this because of yield to cost.
Can you link to the provision allowing conversion to stock worth $14?
I sold RILY preferreds at a loss several years ago. Never interested again when they bounced back. Don’t know if it was prudence or just pissed off at losing money. Now I’m glad I stuck to my guns. Fool me twice shame on me.
Yes MG–I am sure I held some years back, but walked away and never looked back when their deals got shadier and shadier. ZIRP allowed for a lot of dicey deals.
+1 here. Took, as as my associate calls it, a “Sponge Bath” on RILY preferreds as well. Small loss, but a loss just the same. Learned my lesson, I don’t want anything they have.