B. Riley Financial down 7% following recent Moody’s downgrade of Franchise Group

Last week, Moody’s Investors Service downgraded Franchise Group, Inc.’s corporate family rating to B3 from B2, its probability of default rating to B3-PD from B2-PD and its senior secured second lien term loan rating to Caa2 from Caa1. The downgrade reflects governance considerations, including Franchise Group’s increased debt and leverage resulting from the August 21, 2023 completion of its acquisition by a consortium led by management in partnership with B. Riley Financial and Irradiant Partners, the ratings agency stated. The company’s rating incorporates governance factors, including “aggressive financial policies resulting in high financial leverage and weak interest coverage driven by the acquisition of the company along with past acquisitive growth, dividends and share repurchases despite having weak free cash flow,” the agency added. In Monday morning trading, shares of B. Riley Financial are down $2.97, or 7%, to $38.59.