B Riley Prices Upsized Baby Bond Offering

Financial services company B Riley has priced their new offering of baby bonds with a coupon of 6.75%.

This is a fixed rate issue with 3.48 million bonds being sold with an over allotment option of another 522,000 bonds being available.

These bond will have a maturity in 2024 with an early redemption period starting in 2021.

The pricing term sheet can be seen here.

The issue will pay a bonus for early redemption of either 50 (2%) or 25 cents (1%) depending on the date of early redemption.

The company has 5 other issues outstanding which can be seen here.

The ticker for the new issue will be RILYO. There will be no OTC Grey market trading on this bond issue.

For what it is worth the issue is unrated by the major ratings companies, but is rated BBB+ by Egan-Jones.

24 thoughts on “B Riley Prices Upsized Baby Bond Offering”

  1. Just a tip for anyone that may be interested; you might be able to get your orders in pre major exchange listing. I initiated a 1000 share position in RILYO @$24.75 at Merrill Edge. This baby bond should start trading NYSE tomorrow.
    Wealthy people invest first and spend what’s left and broke people spend first and invest what’s left, Nomad

    1. I just tried to trade RILYO using ME online and it wouldn’t go thru…did you call your order in Nomad?

      1. Citadel, yes I had to call the order in to my broker at ME. I actually bought (2) 1000 share lots at $24.75 today. Please let me know if I can be of any help to your anyone else here, Nomad

  2. RILY is a marginal company. A lot of leverage and not a lot of earnings. Not a leader in any of its businesses. Nice coupon (just remember it’s interest, not dividends) if you don’t mind babysitting the company. I’m picking up IG QID prefs with +/- 6% stripped yields (some with a tiny bit of call risk) and I’m happier with those.

    I owned a rather large position in “L” until recently but have sold two-thirds off and expect to be out entirely soon.

    1. “RILY is a marginal company. A lot of leverage and not a lot of earnings. ”

      B. Riley just reported Q1 earnings showing total revenue was 48% higher than the same period last year, adjusted EBITDA doubled, and the company is growing at three times the industry average. They also announced a special dividend equal to more than 50% of the annual distribution to reward shareholders, and their stock price is climbing.

      Maybe I’ve missed something, but these do not sound like marginal results.

      1. Let’s put aside characterizations and work with number then.

        As of last 10-Q, RILY had $264M of shareholders’ equity and $544M of debt. Retained earnings – which are the sum total of earnings throughout the company’s history that have not been distributed to shareholders – is all of $7.4 million.

        Earnings for the full year 2018 were $15.5M on revenues of $390M, a less than 4% margin.

        If you think that shows a strong, thriving business then go all-in. To my eye those numbers (and a great deal of other info) point to a so-so (at best) business.

        Qualitatively, is RILY a leader in anything? Certainly not in any rational mind. That’s why they have to pay 6.75% for the most senior security in the capital stack and why they get rated by Egan-Jones (instead of a real rating agency) and have Ladenburg Thalmann as an underwriter. These two are the Rodney Dangerfield of the investment world for good reason.

        But beauty is in the eye of the beholder so if you like it go for it.

  3. i’m holding the RILYI that I got below par. I’m feeling a little more secure after the good first quarter numbers.

    1. I hold RILYI too…i got in at par. I use to hold RILYL but I sold earlier this year because of the call risk. Nice earnings 🙂

  4. I think I am posting this in the correct place rather than Alerts. Here is a real look at a possible speculative position that I went thru last night in my movie-laptop time (most media is not interesting enough to keep my attention so I multi-task). The view has a real lesson and maybe a spec position for a small gunslinger allocation. Without a bunch of conclusions from me, look at CHK and the interesting history shown with their prefs, let alone the history of the common stock and corporate actions. Of course, researching would include the history of the company and the industry which most of us are prob familiar.
    There may be a real speculative workout potential while collecting high income with some of the issues (with QDI!) which a quick visit to QO will lead. Who says prefs are boring?! It is a fun dig into the past and perhaps a shadow of many current activities by already leveraged companies:
    Reinstated large pref divys, upgrade with a plus sign (CCC+ whoohoo!), no common div to cover, debt buy downs and refis, sell off of non-cores, perhaps a secular commodity shift, Administration supports, but I did no real diligence into the company. I would prob defer to discounted debt if I HAD to take a position in CHK, but for the idle study and fun view…JA
    PS: Also, a quick view of Richard Kinder’s wiki page and the story of Goldilocks (!) is an interesting view too…how the puzzle was laid…”Let he who has ears hear”.
    Happy Hunting JA Taking no positions.

    1. Joel, I am invested 85%-90% conservative, but I reserve the balance as mad money to cowboy with. Some 11%-12% yield and potential capital gains add a bit of spice to life for me. I always split up the mad money among multiple holdings to minimize impact if one goes bad (inevitable) and I dump as soon as I observe a flaw in my thesis. CHK has a very colorful background story best described as uncomplimentary. There has since been a turnaround effort. There is no shortage of commentary available on how it might work out. Nobody knows is the best answer, then add another wildcard of O&G prices. The common stock is so deeply buried under debt and preferred that I don’t know why anybody would buy it. The OTC institutional preferred is much higher yield than the retail but is illiquid. I would never say anything CHK is a “good” or “safe” investment but I hold a small preferred position in my mad money holdings based on the fact they sponsored a NBA arena. As good a reason as any.

  5. This morning I rotated my RILYL into RILYZ for a little longer call protection and a few more basis points of yield.

  6. Well, if they don’t use the proceeds to retire the L issue, what are they going to do with it? Another Magic Jack type investment ? I still don’t trust this company.

    1. “Principal Investments Segment: Revenues increased to $27.5 million from $11.4 million for the same year ago period. Segment income increased to $7.9 million compared to $4.9 million for the same year ago period. Results for this segment include United Online and magicJack vocalTec. The significant increase for this segment’s results was primarily driven by the addition of magicJack, which the company acquired on November 14, 2018.”

    2. Retired: I agree with you about trusting their strategy.

      I understand the attraction of term preferred for some on the board. However, this company is not in my wheelhouse either.

      So far in 2019, the only NEW issue that has come to market that is a long term hold for me is CFG/D. I don’t consider my Canadian reset issues as new issues although some are new OTC symbols.

      Last year, I settled for lower coupon rates in the mid to high 5% range. Same thing this year, except the issue is the PSK ETF paying a steady MONTHLY income at 5.6%. Plenty of “dry powder” in PSK but I will wait.

    3. This company isn’t interested in saving 75bp on a debt refinance. They probably feel they can make a better return than 6.75% using borrowed funds. This is a company that will probably do very well when the stock market and economy is doing well, however it could be very stressed during a market and economic downturn.

      I also thought a one time there was some potential legal issue or ruling about a failed merger which could effect RILY. I don’t know if this has been resolved.

      1. Fred – Though I can’t remember where I saw it (was it here?), but I think I remember seeing the settlement ended up with no costs to RILY – 4/22/19 – Rent-A-Center, Inc. (RCII) (“Rent-A-Center” or the “Company”), a leader in the rent-to-own industry, today announced that it had agreed in principle to settle all litigation with Vintage Capital Management, LLC (“Vintage Capital”) and B. Riley Financial, Inc. relating to the Company’s termination of the Agreement and Plan of Merger (the “Merger Agreement”), dated June 17, 2018, by and among the Company and certain affiliates of Vintage Capital. In the settlement, Rent-A-Center will receive a payment of $92,500,000 in cash. The parties have agreed to enter into a definitive settlement agreement by April 25, 2019 and that the amount due to Rent-A-Center will be paid within 28 days thereafter. In connection with the settlement, Rent-A-Center will exchange mutual releases with all other parties with respect to all matters relating to the Merger Agreement, including its termination.

  7. 6.75% is a good interest rate for B. Riley and 3.5 – 4.0M shares is a very good issue size. I don’t think the callable 7.5% RILYL notes will survive this news, so I’d be selling RILYL here and would consider buying the new O-shares when they come on the market. The 7.5% RILYZ notes trading at par are also an option if your focus is solely on the coupon, although the maturity date (2027) is a bit far away for my taste.

    1. The Use of Proceeds portion of the OS makes no mention of an intention to use proceeds to refund any of the other bonds… That doesn’t negate the possibility but normally if that’s the intention, I think it’s mentioned…

    2. Citadel- thanks for the comment. Assuming you are correct, am I reading this right? It looks like RILYL I’d at 25.31 today…but goes ex dividend on 4/12. So at a .47 cent dividend, doesn’t it make sense to hold, understanding appreciation, if any, will be limited. Thanks.

      1. Yes, if RILYL is redeemed for $25 on 7/31 as expected, holders will only net .16 cents because they’ll lose ~.31 cents of premium. I chose to pocket the premium by selling (yesterday) and will redeploy the proceeds into other B. Riley issues going forward.

        1. Citadel- I am new to this so bear with me. If RILYL is redeemed on 7/31, won’t we get the benefit of 2 distributions…one on 4/31 and one on 7/31? I agree if a person doesn’t have cash to invest in the new issue on hand that it makes sense to sell and get into the new issue at initial offering price, but not taking the new issue into account, doesn’t it make sense to simply hold for someone who doesn’t want to re buy in the new issue?

        2. Citadel- OH GEEZ. Forget the last point. I need to consult the calendar on my desk rather than the calendar in my head next time!

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