B Riley to Sell Baby Bonds

B Riley (RILY) announced they will be selling a new issue of $25/share baby bonds.

The new bonds will have a maturity date in 2028 and will be early redeemable starting in 2022. If called after 1/31/2022 and prior to 1/31/2023 the call is at $25.75. If after 1/31/2023, but before 1/31/2024 the call is at $25.50. If after 1/31/2024, but before 1/31/2025 the call is at $25.25. After this date they are callable at $25.00. All calls also include accrued, but unpaid interest.

The company plans to call the 2027 7.50% baby bonds (RILYZ)–although whether they call the entire issue or just a portion is not yet known.

This new issue will be unrated by any of the major ratings firms.

The company has many baby bond issues outstanding as well as 2 perpetual preferred issues. They can be seen here.

The preliminary prospectus can be read here.

EarlyBird was right on this one as was J and Ralph.

16 thoughts on “B Riley to Sell Baby Bonds”

  1. https://ir.brileyfin.com/2021-01-20-B-Riley-Financial-Announces-Pricing-of-200-Million-Offering-of-Senior-Notes-Due-2028

    … offering of $200 million …

    LOS ANGELES, Jan. 20, 2021 /PRNewswire/ — B. Riley Financial, Inc. (NASDAQ: RILY) (“B. Riley” or the “Company”) today announced that on January 20, 2021 it priced an underwritten registered public offering of $200 million aggregate principal amount of 6.00% senior notes due 2028. The Company has granted the underwriters a 30-day option to purchase up to an additional $30 million aggregate principal amount of senior notes in connection with the offering. The offering is expected to close on January 25, 2021, subject to customary closing conditions.

    B. Riley Financial and this issuance of notes both received an investment grade rating of BBB+ from Egan-Jones Ratings Company, an independent, unaffiliated rating agency. The Company has applied to list the notes on NASDAQ under the symbol “RILYT” and expects the notes to begin trading within 30 business days of the closing date of this offering, if approved.
    The Company expects to use the net proceeds in excess of $50 million from the sale of the notes for the redemption of all or a portion of its existing 7.50% Senior Notes due 2027 as soon as practicable and the remaining net proceeds for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital…

  2. Interestingly, the way the prospectus is written, with approx $125mil RILYZ outstanding, this new issue will have to go from its announced $100 size to $175mil for RILY to call all RILYZ bonds from proceeds… Of course in this day and age, that’s more than possible to happen.

    From a bond calculator point of view, RILYZ is tough to calculate the consequences of a call today because interest will accrue from 1/31 until call date, not from today..You get no accrued between now and 1/31/ Mentally, imho this announcement derisks Z relative to the other issues because of its increased likelihood of call. However, there’s a higher likelihood of a partial call than a full one right now and who knows how quickly… I think a purchase at 25.07 today gives an approximate YTC (with call not being possible before 2/19) of 2.15% annualized approx. but a more accurate calc might come up with a lower number. And of course, the longer Z remains outstanding, the better you do. Rather than sell my Z’s I’ve added today..

    1. Quantum has RILYZ with a market value of $53 million at issuance…where are you sourcing your $125 million outstanding number from?

      1. CW – QOL is never a good source for total amount outstanding… The current prospectus itself uses a number of about $128 mil but the last 10Q says $125 mil. p S-10 “In May 2017, we completed an initial offering of 7.50% 2027 Notes with an aggregate principal amount of $60.4 million…. In June 2017, December 2017, June 2018, December 2018, September 2019, December 2019 and February 2020, we entered into At Market Issuance Sales Agreement with B. Riley Securities to sell, pursuant to one or more of such agreements, additional 7.375% 2023 Notes, 6.875% 2023 Notes, 2024 Notes, 2025 Notes, 2026 Notes, 7.50% 2027 Notes, 7.25% 2027 Notes, and 2021 Notes, under which such agreements, we sold … $67,780,700 in aggregate principal amount of 7.50% 2027 Notes…”

          1. Latest 10Q, page 23,
            NOTE 10—SENIOR NOTES PAYABLE Senior notes payable, net, are comprised of the following, as of September 30, 2020, in thousands:
            7.50% Senior notes due May 31, 2027 $125,536
            7.25% Senior notes due December 31, 2027 $122,545
            7.375% Senior notes due May 31, 2023 $127,697
            6.875% Senior notes due September 30, 2023 $113,109
            6.75% Senior notes due May 31, 2024 $110,476
            6.50% Senior notes due September 30, 2026 $134,657
            6.375% Senior notes due February 28, 2025 $130,942

            For a total of $864,962.

          2. From their most recent 10-K, filed March 2020:
            https://www.sec.gov/Archives/edgar/data/1464790/000121390020005801/f10k2019_brileyfinancial.htm
            Page 44:
            “Our senior notes include: (a) “the 6.875% 2023 Notes” with an aggregate principal amount of approximately $106.0 million; (b) “the 7.375% 2023 Notes” with an aggregate principal amount of approximately $122.1 million, (c) “the 7.25% 2027 Notes” with an aggregate principal amount of $120.1 million; (d) “the 7.50% 2027 Notes” with an aggregate principal amount of $118.0 million; (e) “2024 Notes” with an aggregate …”

            Also on page 67 (Liquidity and Capital Resources):
            “As of December 31, 2019, we had $104.3 million of unrestricted cash and cash equivalents, $0.5 million of restricted cash, $451.6 million of securities and other investments held at fair value, $225.8 million of loans receivable, and $814.9 million of borrowings outstanding. The borrowings outstanding of $814.9 million at December 31, 2019 included (a) $118.0 million of borrowings from the issuance of the 7.50% 2027 Notes, (b) $120.1 million of borrowings from the issuance …”

            1. mbg – The most recent 10q would be more current than the 10k and potentially the prospectus updates that, however, the prospectus could possibly be quoting a carrying figure not a par amount.

              1. Thanks, 2WR. Yes, I first searched the 10-Q, but made too cursory a search. Good thing you and blkrahn posted the 10-Q passage.

            1. My guess is RILYZ will be a partial call, but we shall see.

              I remember reading one of their quarterly conference call transcripts last summer and an analyst asked if they tried to buy any of their baby bonds in March 2020 that were trading as low as $10/share.

              RILY management responded that they only bought back a very small amount. Now they will be redeeming them at $25 + interest. What a difference a year makes!

              Will be sad to see another solid high-yielder removed from my income portfolio. The large capital gains are nice, but finding a replacement will be another epic struggle.

              1. Remember this statement from Use of Proceeds on RILYM dated 2/10/20?

                NOTE: It never happened. They never called any RILYZ:

                “We anticipate using 20% of the net proceeds from the sale of the notes for the redemption of a portion of our existing 7.50% 2027 Notes (as soon as practicable after the 7.50% 2027 Notes are subject to optional redemption on or after May 31, 2020) and the remaining net proceeds for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital. Pending such use, we may invest the net proceeds in short-term interest-bearing accounts, securities or similar investments.

                This prospectus supplement shall not constitute a notice of redemption under the indentures governing the 7.50% 2027 Notes. Any such notice, if made, will only be made in accordance with the provisions of the applicable indenture.”

                1. They never redeemed any RILYZ with proceeds from RILYM but they did buyback some baby bonds well below par during the crisis instead. No point redeeming when you can buyback way below par.

        1. I stand corrected…and thanks for making me do some homework. Their 2019 redemption of RILYL was for more than twice the original market value also.

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