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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K/A
CURRENT
REPORT
Pursuant to Section 13 OR 15(d) of The Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 3, 2026
BRC Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
| Delaware |
|
001-37503 |
|
27-0223495 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
11100 Santa Monica Blvd., Suite 800
Los Angeles, CA 90025
(310) 966-1444
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Securities registered pursuant to Section 12(b)
of the Act:
| Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
| Common Stock, par value $0.0001 per share |
|
RILY |
|
Nasdaq Global Market |
| Depositary Shares (each representing 1/1000th of a share of 6.875% Series A Cumulative Perpetual Preferred Stock) |
|
RILYP |
|
Nasdaq Global Market |
| Depositary Shares (each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual Preferred Stock) |
|
RILYL |
|
Nasdaq Global Market |
| 5.00% Senior Notes due 2026 |
|
RILYG |
|
Nasdaq Global Market |
| 5.25% Senior Notes due 2028 |
|
RILYZ |
|
Nasdaq Global Market |
| 6.00% Senior Notes due 2028 |
|
RILYT |
|
Nasdaq Global Market |
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY NOTE
As previously disclosed by BRC Group Holdings, Inc. (the “Company”
or “BRC”) under Item 2.01 of its Current Report on Form 8-K filed on November 5, 2026 (the “Original 8-K”),
on November 3, 2026, pursuant to the Membership Interest Purchase Agreement, dated November 3, 2026 (the “Purchase Agreement”),
by and among BR Finance Co., LLC (“Seller”), BR Financial Holdings, LLC (“BR Holdings”) OCM SSF
III Great American PT, L.P., Opps XII Great American Holdings, LLC, VOF Great American Holdings, L.P., Opps XII Broker D Holdings, L.P.,
OPIF Broker Holdings, L.P., Oaktree-Copley Investments, LLC, RPVOF Broker CTB, LLC and OCM SSF III Broker Debt Holdings, L.P. (together,
the “Purchaser Parties”), each an affiliate of Oaktree Capital Management, L.P., Seller sold its remaining membership
interests in Great American Holdings, LLC (“Great American”) to certain of the Purchaser Parties (the “GA
Transaction”). Concurrently with the GA Transaction, BRC, BR Holdings, each of the other loan parties party thereto, each of
the lenders party thereto, and Oaktree Fund Administration, LLC, as administrative agent and as collateral agent (“Oaktree”),
entered into Amendment No. 7 to Credit Agreement and Amendment No. 2 to Guarantee and Collateral Agreement, dated as of November 3, 2026
(collectively, “Amendment No. 7”).
This Current Report on Form 8-K/A amends the Original 8-K to (i) file
the financial information required by Item 9.01(b) of Form 8-K. The pro forma financial information also gives effect to Amendment No.
7 and (ii) amend certain previously reported information in the Original 8-K, as described in Item 1.01 below. Accordingly, this Form
8-K/A should be read in conjunction with the Original 8-K and, except as set forth herein, no other changes have been made to information
contained in the Original 8-K.
Item 1.01 Entry into a Material Definitive
Agreement
Great American Holdings, LLC Transaction
On November 3, 2026, Seller sold its remaining
equity interest in Great American, in exchange for total consideration of $62,250,000, approximately $51.7
of which was used to repay a portion of BR Holdings’ outstanding term-loan indebtedness owed to the lenders affiliated with Oaktree pursuant to the
Credit Agreement, dated as of February 26, 2025 (as amended by Amendment No. 1 to Credit Agreement and Guarantee and Collateral Agreement,
dated as of March 24, 2025, as amended by Amendment No. 2 to Credit Agreement, dated as of July 8, 2025, as amended by Amendment No. 3
to Credit Agreement, dated as of October 8, 2025, as amended by Amendment No. 4 to Credit Agreement, dated as of January 14, 2026, as
amended by Amendment No. 5 to Credit Agreement, dated as of August 7, 2026, as amended by Amendment No. 6 to Credit Agreement, Consent
and Waiver, dated as of September 28, 2026, as amended by Amendment No. 7 to Credit Agreement and Amendment No. 2 to Guarantee and Collateral
Agreement, dated as of November 3, 2026, and as further amended, restated, amended and restated, supplemented or otherwise modified from
time to time prior to the date hereof), among BRC, BR Holdings, each of the other loan parties party thereto, each of the lenders party
thereto and Oaktree.
The foregoing summary of the Purchase Agreement
and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full
text of the Purchase Agreement, a copy of which was filed as Exhibit 2.1 to the Original 8-K.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information
The Unaudited Pro Forma Consolidated
Balance Sheet as of September 30, 2026 and the Unaudited Pro Forma Consolidated Statements of Operations for the nine months
ended September 30, 2026 and for the year ended December 31, 2025, and the related notes thereto,
required to be filed under Item 9.01 of this Current Report on Form 8-K/A are included in this filing as Exhibit 99.1 to this Current
Report on Form 8-K/A.
(d) Exhibits.
Exhibit
Number |
|
Description |
| 99.1 |
|
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2026 and the Unaudited Pro Forma Consolidated Statements of Operations for the nine months ended September 30, 2026 and for the year ended December 31, 2025, and the related notes thereto. |
| 104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Cautionary Language Regarding Forward-Looking
Statements
This Current Report on Form 8-K/A contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical
fact are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors
which may cause the Company’s performance or achievements to be materially different from any expected future results, performance,
or achievements. Forward-looking statements speak only as of the date they are made and the Company assumes no duty to update forward
looking statements, except as required by law. Actual future results, performance or achievements may differ materially from historical
results or those anticipated depending on a variety of factors, some of which are beyond the control of the Company, including but not
limited to, the occurrence of any event, change or other circumstances that affect the tax or accounting treatment of the GA Transaction.
In addition to these factors, investors should review the “Risk Factors” set forth in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2025 and Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2026,
June 30, 2026 and September 30, 2026, and other filings with the United States Securities and Exchange Commission, which identify important
factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking
statements in this communication.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| |
BRC Group Holdings, Inc. |
| |
|
| |
By |
/s/ Scott Yessner |
| |
Name: |
Scott Yessner |
| |
Title: |
Executive Vice President and
Chief Financial Officer |
Date: November 9, 2026
Exhibit 99.1
BRC GROUP HOLDINGS, INC.
Unaudited Pro Forma Consolidated Financial Information
(Dollars in thousands, except share data)
Introduction
Description of the Transactions
On November 3, 2026, BRC Group Holdings, Inc.
(the “Company”) completed the sale of its entire equity interest in Great American Holdings, LLC (“GA Holdings”) to
funds managed by Oaktree Capital Management, L.P. (collectively, “Oaktree”) (the “Disposition”). The Company accounted
for its interest in GA Holdings under the equity method. Oaktree holds the majority and controlling interest in GA Holdings and is also
the lender under the Company’s term loan credit agreement dated February 26, 2025, as amended (the “Oaktree Credit Agreement”).
The term loans outstanding under the Oaktree Credit Agreement are referred to as the “Oaktree Term Loan”.
As consideration for the Disposition, Oaktree
paid an aggregate purchase price of $62,250 for the Company’s equity method investment in GA Holdings. The $62,250 of consideration the
Company received from Oaktree consisted of $10,570 of cash and a $51,680 reduction of indebtedness owed under the Oaktree Term Loan, through
the cancellation and discharge of $51,680 of term loan principal (the “Prepaid Term Loans”). No prepayment premium was payable
in connection with the reduction of indebtedness. For accounting purposes, the Disposition represents a transfer of a financial asset
under ASC 860. Upon completion of the transfer, the Company derecognized its equity method investment in accordance with ASC 323. Consideration
was measured at the fair value of the Company’s interest in GA Holdings of $62,250, which was determined using a market approach based
on the negotiated price to sell the GA Holdings investment to Oaktree and equals the carrying amount of the investment at September 30,
2026 after the other-than-temporary impairment recorded in the third quarter of 2026 (see Note 2); accordingly, no gain or loss on the
transfer is reflected in the pro forma adjustments.
Concurrently with the Disposition, the Company
and Oaktree entered into Amendment No. 7 to the Oaktree Credit Agreement (the “Facility Amendment”). Immediately prior to the
Disposition, a $3,281 transaction fee payable in connection with the Facility Amendment was capitalized and added to the outstanding principal
balance of the existing term loans. Following the Disposition and the $51,680 reduction of indebtedness owed under the Oaktree Term Loan,
Oaktree advanced $26,500 of additional term loans (the “Amendment No. 7 Term Loans”), which bear interest at the same rate applicable
to the existing Oaktree Term Loan. A closing fee equal to 2.0% of the Amendment No. 7 Term Loans, or $530 in total, was payable at closing
and was netted from the proceeds of the Amendment No. 7 Term Loans. The Facility Amendment also provides that, from and after its effective
date, no prepayment premium applies to the outstanding term loans, and released the Company’s interests in GA Holdings from the borrowing
base and the collateral securing the Oaktree Term Loan.
The $51,680 reduction of indebtedness owed under
the Oaktree Term Loan was accounted for as a partial extinguishment of the Oaktree Term Loan, and the Facility Amendment as a modification
of the continuing Oaktree Term Loan, under ASC 470-50; see Note 2. Immediately following the capitalization of the $3,281 transaction
fee and the reduction of indebtedness, and before giving effect to the $26,500 of Amendment No. 7 Term Loans advanced at closing, $17,227
of principal remained outstanding under the Oaktree Credit Agreement. After giving effect to the Amendment No. 7 Term Loans, the outstanding
principal balance under the Oaktree Credit Agreement was $43,727.
The accounting for the Disposition and the Facility
Amendment is preliminary. See Note 1.
Basis of Presentation
The unaudited pro forma consolidated financial
information has been prepared in accordance with Article 11 of Regulation S-X and is derived from the Company’s audited consolidated financial
statements for the year ended December 31, 2025 included in its Annual Report on Form 10-K and its unaudited condensed consolidated financial
statements as of and for the nine months ended September 30, 2026 included in its Quarterly Report on Form 10-Q, and should be read in
conjunction with those financial statements and the related notes.
The unaudited pro forma consolidated balance sheet
as of September 30, 2026 gives effect to the Disposition and the Facility Amendment as if they had occurred on September 30, 2026. The
unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2026 and the year ended December 31,
2025 give effect to the Disposition and the Facility Amendment as if they had occurred on January 1, 2025. The Disposition does not qualify
as a discontinued operation under ASC 205-20 since the sale of the equity investment is not considered a strategic shift in the Company’s
operations. The pro forma adjustments consist solely of transaction accounting adjustments; no autonomous entity adjustments are required
and no management’s adjustments are presented. Pro forma basic and diluted earnings per share are computed using the Company’s historical
weighted average shares outstanding; no shares were issued in connection with the Disposition or the Facility Amendment. Diluted earnings
per share for the nine months ended September 30, 2026 reflects the adjustment to the numerator for the change in fair value of warrants
and gain on warrant exercise as presented in the Company’s historical financial statements.
The unaudited pro forma consolidated financial
information is presented for illustrative and informational purposes only and does not purport to represent what the Company’s financial
position or results of operations would have been had the Disposition and the Facility Amendment occurred on the dates indicated, and
is not necessarily indicative of the Company’s future financial position or results of operations. The pro forma adjustments are based
on available information and assumptions that management believes are reasonable; the actual accounting and results may differ materially.
BRC GROUP HOLDINGS, INC.
Unaudited Pro Forma Consolidated Balance
Sheet
As of September 30, 2026
(Dollars in thousands, except share data)
| | |
As Reported
September 30,
2026 | | |
Transaction
Accounting
Adjustments
(Note 3) | |
| |
Pro Forma
September 30,
2026 | |
| ASSETS | |
| | |
| |
| |
| |
| Assets: | |
| | |
| |
| |
| |
| Cash and cash equivalents | |
$ | 144,072 | | |
$ | 10,570 | |
(b) | |
$ | 180,021 | |
| | |
| | | |
| (591 | ) |
(b) | |
| | |
| | |
| | | |
| 25,970 | |
(g) | |
| | |
| Restricted cash | |
| 1,651 | | |
| | |
| |
| 1,651 | |
| Due from clearing brokers | |
| 19,402 | | |
| | |
| |
| 19,402 | |
| Securities and other investments owned ($307,830 at fair value) | |
| 369,818 | | |
| | |
| |
| 369,818 | |
| Securities borrowed | |
| 235,009 | | |
| | |
| |
| 235,009 | |
| Accounts receivable, net of allowance for credit losses of $5,560 | |
| 59,062 | | |
| | |
| |
| 59,062 | |
| Loans receivable, at fair value ($1,086 from related parties) | |
| 10,798 | | |
| | |
| |
| 10,798 | |
| Equity investments | |
| 68,059 | | |
| (62,250 | ) |
(a) | |
| 5,809 | |
| Prepaid expenses and other assets | |
| 117,961 | | |
| | |
| |
| 117,961 | |
| Operating lease right-of-use assets | |
| 36,252 | | |
| | |
| |
| 36,252 | |
| Property and equipment, net | |
| 18,268 | | |
| | |
| |
| 18,268 | |
| Goodwill | |
| 392,687 | | |
| | |
| |
| 392,687 | |
| Other intangible assets, net | |
| 94,599 | | |
| | |
| |
| 94,599 | |
| Deferred income taxes | |
| 793 | | |
| | |
| |
| 793 | |
| Assets of discontinued operations | |
| 2,221 | | |
| | |
| |
| 2,221 | |
| Total assets | |
$ | 1,570,652 | | |
$ | (26,301 | ) |
| |
$ | 1,544,351 | |
| LIABILITIES AND DEFICIT | |
| | | |
| | |
| |
| | |
| Liabilities: | |
| | | |
| | |
| |
| | |
| Accounts payable | |
$ | 34,929 | | |
| | |
| |
$ | 34,929 | |
| Accrued expenses and other liabilities ($190 at fair value) | |
| 125,198 | | |
| (591 | ) |
(b) | |
| 124,697 | |
| | |
| | | |
| 27 | |
(g) | |
| | |
| | |
| | | |
| 63 | |
(c) | |
| | |
| Deferred revenue | |
| 45,030 | | |
| | |
| |
| 45,030 | |
| Deferred income taxes | |
| 4,409 | | |
| | |
| |
| 4,409 | |
| Securities sold not yet purchased, at fair value | |
| 7,897 | | |
| | |
| |
| 7,897 | |
| Securities loaned | |
| 217,125 | | |
| | |
| |
| 217,125 | |
| Operating lease liabilities | |
| 43,773 | | |
| | |
| |
| 43,773 | |
| Revolving credit facilities | |
| 32,285 | | |
| | |
| |
| 32,285 | |
| Term loans, net | |
| 115,421 | | |
| (47,812 | ) |
(b) | |
| 93,552 | |
| | |
| | | |
| 25,943 | |
(g) | |
| | |
| Senior notes payable, net | |
| 988,328 | | |
| | |
| |
| 988,328 | |
| Liabilities of discontinued operations | |
| 830 | | |
| | |
| |
| 830 | |
| Total liabilities | |
$ | 1,615,225 | | |
$ | (22,370 | ) |
| |
$ | 1,592,855 | |
| Commitments and contingencies | |
| | | |
| | |
| |
| | |
| BRC Group Holdings, Inc. stockholders’ deficit: | |
| | | |
| | |
| |
| | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,563 shares issued and outstanding and liquidation preference of $128,187 | |
$ | — | | |
| | |
| |
$ | — | |
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 40,199,755 shares issued and outstanding | |
| 4 | | |
| | |
| |
| 4 | |
| Additional paid-in capital | |
| 680,912 | | |
| | |
| |
| 680,912 | |
| Accumulated deficit | |
| (770,467 | ) | |
| (3,931 | ) |
(c) | |
| (774,398 | ) |
| Accumulated other comprehensive loss | |
| (8,167 | ) | |
| | |
| |
| (8,167 | ) |
| Total BRC Group Holdings, Inc. stockholders’ deficit | |
$ | (97,718 | ) | |
$ | (3,931 | ) |
| |
$ | (101,649 | ) |
| Noncontrolling interests | |
| 53,145 | | |
| | |
| |
| 53,145 | |
| Total deficit | |
$ | (44,573 | ) | |
$ | (3,931 | ) |
| |
$ | (48,504 | ) |
| Total liabilities and deficit | |
$ | 1,570,652 | | |
$ | (26,301 | ) |
| |
$ | 1,544,351 | |
See accompanying notes to unaudited pro forma
consolidated financial information.
BRC GROUP HOLDINGS, INC.
Unaudited Pro Forma Consolidated Statement
of Operations
For the Nine Months Ended September 30, 2026
(Dollars in thousands, except share data)
| | |
As Reported
Nine Months
Ended
September 30, 2026 | | |
Transaction
Accounting
Adjustments
(Note 3) | |
| |
Pro Forma
Nine Months
Ended
September 30,
2026 | |
| Revenues: | |
| | |
| |
| |
| |
| Services and fees ($13,105 from related parties) | |
$ | 438,168 | | |
| | |
| |
$ | 438,168 | |
| Trading gains, net | |
| 33,534 | | |
| | |
| |
| 33,534 | |
| Fair value adjustments on loans ($106 from related parties) | |
| 12,005 | | |
| | |
| |
| 12,005 | |
| Interest income - loans | |
| 5,394 | | |
| | |
| |
| 5,394 | |
| Interest income - securities lending | |
| 4,887 | | |
| | |
| |
| 4,887 | |
| Sale of goods | |
| 130,217 | | |
| | |
| |
| 130,217 | |
| Total revenues | |
| 624,205 | | |
| — | |
| |
| 624,205 | |
| Operating expenses: | |
| | | |
| | |
| |
| | |
| Direct cost of services | |
| 88,186 | | |
| | |
| |
| 88,186 | |
| Cost of goods sold | |
| 92,619 | | |
| | |
| |
| 92,619 | |
| Selling, general and administrative expenses | |
| 382,134 | | |
| | |
| |
| 382,134 | |
| Restructuring charge | |
| 1,934 | | |
| | |
| |
| 1,934 | |
| Impairment of tradename | |
| 5,200 | | |
| | |
| |
| 5,200 | |
| Interest expense - Securities lending and loan participations sold | |
| 2,723 | | |
| | |
| |
| 2,723 | |
| Total operating expenses | |
| 572,796 | | |
| — | |
| |
| 572,796 | |
| Operating income | |
| 51,409 | | |
| — | |
| |
| 51,409 | |
| Other income (expense): | |
| | | |
| | |
| |
| | |
| Interest income | |
| 938 | | |
| | |
| |
| 938 | |
| Dividend income | |
| 1,000 | | |
| | |
| |
| 1,000 | |
| Realized and unrealized gains on investments | |
| 19,707 | | |
| | |
| |
| 19,707 | |
| Change in fair value of financial instruments and other | |
| (3,126 | ) | |
| | |
| |
| (3,126 | ) |
| Loss from equity investments | |
| (18,625 | ) | |
| 6,547 | |
(d) | |
| (12,078 | ) |
| Gain on extinguishment of debt | |
| 1,607 | | |
| | |
| |
| 1,607 | |
| Interest expense | |
| (55,652 | ) | |
| 9,728 | |
(e) | |
| (53,854 | ) |
| | |
| | | |
| (7,930 | ) |
(h) | |
| | |
| (Loss) income from continuing operations before income taxes | |
| (2,742 | ) | |
| 8,345 | |
| |
| 5,603 | |
| Benefit from (provision for) income taxes | |
| 1,207 | | |
| (2,178 | ) |
(f) | |
| (971 | ) |
| (Loss) income from continuing operations | |
| (1,535 | ) | |
| 6,167 | |
| |
| 4,632 | |
| Income from continuing operations attributable to noncontrolling interests | |
| 3,245 | | |
| | |
| |
| 3,245 | |
| (Loss) income from continuing operations attributable to BRC Group Holdings, Inc. | |
| (4,780 | ) | |
| 6,167 | |
| |
| 1,387 | |
| Preferred stock dividends | |
| 6,045 | | |
| | |
| |
| 6,045 | |
| Loss from continuing operations available to common shareholders | |
$ | (10,825 | ) | |
$ | 6,167 | |
| |
$ | (4,658 | ) |
| Basic loss from continuing operations per common share | |
$ | (0.29 | ) | |
| | |
| |
$ | (0.13 | ) |
| Diluted loss from continuing operations per common share | |
$ | (0.33 | ) | |
| | |
| |
$ | (0.16 | ) |
| Weighted average basic common shares outstanding | |
| 36,683,700 | | |
| | |
| |
| 36,683,700 | |
| Weighted average diluted common shares outstanding | |
| 36,837,593 | | |
| | |
| |
| 36,837,593 | |
See accompanying notes to unaudited pro forma
consolidated financial information.
BRC GROUP HOLDINGS, INC.
Unaudited Pro Forma Consolidated Statement of
Operations
For the Year Ended December 31, 2025
(Dollars in thousands, except share data)
| | |
As Reported
Year Ended
December 31,
2025 | | |
Transaction
Accounting
Adjustments
(Note 3) | |
| |
Pro Forma
Year Ended
December 31,
2025 | |
| Revenues: | |
| | |
| |
| |
| |
| Services and fees ($12,543 from related parties) | |
$ | 633,836 | | |
| | |
| |
$ | 633,836 | |
| Trading gains, net | |
| 125,530 | | |
| | |
| |
| 125,530 | |
| Fair value adjustments on loans ($2,061 from related parties) | |
| (448 | ) | |
| | |
| |
| (448 | ) |
| Interest income - loans ($1,910 from related parties) | |
| 10,574 | | |
| | |
| |
| 10,574 | |
| Interest income - securities lending | |
| 6,993 | | |
| | |
| |
| 6,993 | |
| Sale of goods | |
| 191,114 | | |
| | |
| |
| 191,114 | |
| Total revenues | |
| 967,599 | | |
| — | |
| |
| 967,599 | |
| Operating expenses: | |
| | | |
| | |
| |
| | |
| Direct cost of services | |
| 139,417 | | |
| | |
| |
| 139,417 | |
| Cost of goods sold | |
| 145,364 | | |
| | |
| |
| 145,364 | |
| Selling, general and administrative expenses | |
| 599,748 | | |
| 63 | |
(c) | |
| 599,811 | |
| Restructuring charge | |
| 195 | | |
| | |
| |
| 195 | |
| Impairment of goodwill and tradenames | |
| 1,500 | | |
| | |
| |
| 1,500 | |
| Interest expense - Securities lending and loan participations sold | |
| 5,794 | | |
| | |
| |
| 5,794 | |
| Total operating expenses | |
| 892,018 | | |
| 63 | |
| |
| 892,081 | |
| Operating income | |
| 75,581 | | |
| (63 | ) |
| |
| 75,518 | |
| Other income (expense): | |
| | | |
| | |
| |
| | |
| Interest income | |
| 3,710 | | |
| | |
| |
| 3,710 | |
| Dividend income | |
| 1,818 | | |
| | |
| |
| 1,818 | |
| Realized and unrealized gains on investments | |
| 62,718 | | |
| | |
| |
| 62,718 | |
| Change in fair value of financial instruments and other | |
| 11,349 | | |
| | |
| |
| 11,349 | |
| Gain on sale and deconsolidation of businesses | |
| 86,213 | | |
| | |
| |
| 86,213 | |
| Gain on senior note exchange | |
| 67,208 | | |
| | |
| |
| 67,208 | |
| Income from equity investments | |
| 34,996 | | |
| (887 | ) |
(d) | |
| 34,109 | |
| Loss on extinguishment of debt | |
| (21,298 | ) | |
| (3,868 | ) |
(c) | |
| (25,166 | ) |
| Interest expense | |
| (92,736 | ) | |
| 10,288 | |
(e) | |
| (91,395 | ) |
| | |
| | | |
| (8,947 | ) |
(h) | |
| | |
| Income from continuing operations before income taxes | |
| 229,559 | | |
| (3,477 | ) |
| |
| 226,082 | |
| Benefit from income taxes | |
| 9,885 | | |
| 907 | |
(f) | |
| 10,792 | |
| Income from continuing operations | |
| 239,444 | | |
| (2,570 | ) |
| |
| 236,874 | |
| Income from continuing operations attributable to noncontrolling interests | |
| 2,870 | | |
| | |
| |
| 2,870 | |
| Income from continuing operations attributable to BRC Group Holdings, Inc. | |
| 236,574 | | |
| (2,570 | ) |
| |
| 234,004 | |
| Preferred stock dividends | |
| 8,060 | | |
| | |
| |
| 8,060 | |
| Income from continuing operations available to common shareholders | |
$ | 228,514 | | |
$ | (2,570 | ) |
| |
$ | 225,944 | |
| Basic income from continuing operations per common share | |
$ | 7.48 | | |
| | |
| |
$ | 7.39 | |
| Diluted income from continuing operations per common share | |
$ | 7.48 | | |
| | |
| |
$ | 7.39 | |
| Weighted average basic common shares outstanding | |
| 30,555,258 | | |
| | |
| |
| 30,555,258 | |
| Weighted average diluted common shares outstanding | |
| 30,555,258 | | |
| | |
| |
| 30,555,258 | |
See accompanying notes to unaudited pro forma
consolidated financial information.
BRC GROUP HOLDINGS, INC.
Notes to the Unaudited Pro Forma Consolidated
Financial Information
(Dollars in thousands, except share and per
share data)
Note 1. Basis of Presentation and Preliminary
Accounting
The Disposition of the GA Holdings equity method
investment, with a carrying amount of $62,250 at September 30, 2026, represents a transfer of a financial asset under ASC 860. Upon completion
of the transfer, the Company derecognized its equity method investment in accordance with ASC 323. No gain or loss is reflected because
the sale price to Oaktree of $62,250 equals the carrying amount. The Company evaluated the Disposition and the Facility Amendment as a
single transaction with Oaktree. The $51,680 principal reduction is accounted for as a partial extinguishment of the Oaktree Term Loan
under ASC 470-50. The continuing Oaktree Term Loan, including the additional borrowings at closing, is accounted for as a modification
and prospectively using a revised effective interest rate. The transaction fee, closing fee and lender counsel fees payable to Oaktree
are recorded as a discount on the continuing Oaktree Term Loan and amortized as interest expense; third-party costs are expensed as incurred.
The Disposition and the Facility Amendment were
negotiated with the same counterparty, closed concurrently, and were contractually and economically interdependent. The reduction of the
Oaktree Term Loan constituted a component of the consideration received for the GA Holdings interest. Management therefore concluded that
presenting the transactions in a single column of transaction accounting adjustments most clearly depicts their combined accounting effects.
The individual effects of each transaction component are identified separately in Note 3.
Preliminary Accounting
The accounting reflected in the unaudited pro
forma consolidated financial information is preliminary. The Company has not completed its evaluation of whether the Disposition and the
Facility Amendment constitute a troubled debt restructuring and has not completed the third-party valuation of its interest in GA Holdings
as of the transaction date. The Company requires the completed valuation and related analyses to finalize the fair value of the GA Holdings
interest, the allocation of that fair value between the cash consideration and the reduction of the Oaktree Term Loan, and the accounting
for the extinguished and continuing portions of the Oaktree Term Loan. The resolution of these matters could change the gain or loss on
the transfer, the loss on partial extinguishment, the carrying amount and effective interest rate of the continuing Oaktree Term Loan,
and the related interest expense and income tax effects reflected in the pro forma financial information. The Company expects to finalize
these analyses in connection with the preparation of its financial statements for the year ending December 31, 2026. A $1,000 change in
the fair value assigned to the GA Holdings interest would change the gain or loss on the transfer and the loss on partial extinguishment
by offsetting amounts of $1,000. The ultimate accounting could differ materially if the Company concludes that accounting guidance other
than that reflected in these pro forma statements applies.
Note 2. Transfer of the GA Holdings Interest
and Partial Extinguishment of the Oaktree Term Loan
The Company transferred its GA Holdings interest
for consideration of $62,250, equal to the investment’s September 30, 2026 carrying amount. Accordingly, no pro forma gain or loss on
the transfer was recorded. Estimated transaction costs of $63 are expensed separately (see note (c)). The total consideration received,
its components and how each was measured, and the reconciliation of the cash consideration to the cash adjustments in note (b), are as
follows:
| Cash received from Oaktree (amount received at closing) | |
$ | 10,570 | |
| Reduction of indebtedness under the Oaktree Term Loan (Prepaid Term Loans cancelled; fair value attributed equals total consideration less cash, and equals the principal cancelled) | |
| 51,680 | |
| Total consideration (fair value of the GA Holdings interest; market approach based on the negotiated sale price) | |
$ | 62,250 | |
| | |
| | |
| Cash consideration | |
$ | 10,570 | |
| Less: accrued interest on the Prepaid Term Loans paid at closing | |
| (591 | ) |
| Net cash adjustment (b) | |
$ | 9,979 | |
In the third quarter of 2026, in contemplation
of the Disposition, the Company recorded an other-than-temporary impairment of $14,552 to reduce the carrying amount of its investment
in GA Holdings to its estimated fair value of $62,250. The impairment is included in (loss) income from equity investments in the historical
statement of operations for the nine months ended September 30, 2026, is nonrecurring and has not been eliminated in the pro forma adjustments.
The Prepaid Term Loans were repaid with the portion
of the purchase price applied by offset. Because the repayment and the Facility Amendment were negotiated with Oaktree as a single transaction
and the terms of the continuing Oaktree Term Loan are not substantially different from the original terms under ASC 470-50, the repayment
is accounted for as a partial extinguishment of the Oaktree Term Loan, with the reacquisition price measured at the fair value of the
GA Holdings interest attributed to the Prepaid Term Loans (the fair value attributed to the debt reduction was $51,680, equal to the $62,250
total consideration less the $10,570 of cash consideration, which equals the principal repaid), and the continuing Oaktree Term Loan is
accounted for as a modification. The loss on partial extinguishment therefore equals the unamortized discount attributable to the Prepaid
Term Loans on a pro rata basis.
The loss on partial extinguishment of the Prepaid
Term Loans was determined as follows:
| Principal of the Prepaid Term Loans repaid | |
$ | 51,680 | |
| Less: unamortized discount, net, attributable to the Prepaid Term Loans | |
| (3,868 | ) |
| Net carrying amount of the Prepaid Term Loans extinguished | |
| 47,812 | |
| Less: fair value of the GA Holdings interest attributed to the Prepaid Term Loans (reacquisition price) | |
| (51,680 | ) |
| Loss on partial extinguishment of the Prepaid Term Loans | |
$ | (3,868 | ) |
The carrying amount of the continuing Oaktree
Term Loan, including the additional term loans advanced under the Facility Amendment, was determined as follows:
| Principal of the continuing Oaktree Term Loan | |
$ | 43,727 | |
| Less: unamortized discount, net, on the remaining Initial Term Loans | |
| (1,045 | ) |
| Less: transaction fee, closing fee and lender counsel fees payable to Oaktree, recorded as a discount | |
| (3,838 | ) |
| Carrying amount of the continuing Oaktree Term Loan after the modification | |
$ | 38,844 | |
The legal principal amount of the continuing Oaktree
Term Loan is $43,727 on the pro forma basis; the difference between its carrying amount of $38,844 and the principal amount is amortized
as an increase in interest expense over the expected term using the effective interest method (see note (h)).
A $1,000 change in the fair value of the GA Holdings
interest would change the gain or loss on transfer and the loss on partial extinguishment by offsetting amounts of $1,000, with no effect
on the carrying amount of the continuing Oaktree Term Loan or its effective interest rate of 27.2%.
Amounts are based on the balances at September
30, 2026. The unamortized discount at that date includes the $3,125 fee added to principal under Amendment No. 5 to the Oaktree Credit
Agreement dated August 7, 2026, which is reflected in the loss on partial extinguishment and in the carrying amount of the continuing
Oaktree Term Loan. The mandatory prepayment feature added by Amendment No. 6 dated September 28, 2026 is bifurcated as an embedded derivative
with an immaterial fair value at September 30, 2026, included in accrued expenses and other liabilities, which is not adjusted in the
pro forma balance sheet.
Note 3. Pro Forma Adjustments
The transaction accounting adjustments included
in the unaudited pro forma consolidated balance sheet as of September 30, 2026 and statements of operations for the nine months ended
September 30, 2026 and the year ended December 31, 2025 are as follows:
| a. | Reflects the removal of the carrying amount of the Company’s equity method investment in GA Holdings of
$62,250. |
| b. | Reflects the receipt of $10,570 in net cash from Oaktree, less $591 of accrued interest paid at closing
on the Prepaid Term Loans, and the partial extinguishment of the Prepaid Term Loans through the application of the purchase price by offset,
reducing term loans, net by $47,812 (the net carrying amount of the Prepaid Term Loans) and accrued expenses and other liabilities by
$591. See Note 2. |
| c. | Reflects the loss on partial extinguishment of the Prepaid Term Loans of $3,868 described in Note 2 and
estimated transaction costs of $63, which are accrued in accrued expenses and other liabilities, both reflected in the pro forma statement
of operations for the year ended December 31, 2025 only and in accumulated deficit in the pro forma balance sheet. No gain or loss on
the transfer of the GA Holdings interest is reflected because its fair value equals its carrying amount at September 30, 2026 (see Note
2). These items and the related income tax effect in the pro forma statement of operations for the year ended December 31, 2025 (see note
(f)) are nonrecurring and are not reflected in the pro forma statement of operations for the nine months ended September 30, 2026. |
| d. | Reflects the elimination of the Company’s equity in the net loss of GA Holdings of $6,547 for the nine
months ended September 30, 2026 and equity in the net income of GA Holdings of $887 for the year ended December 31, 2025. The other-than-temporary
impairment of $14,552 recorded in the third quarter of 2026 is not eliminated (see Note 2). The Company’s other equity method investment
is not affected. |
| e. | Reflects the elimination of historical interest expense on the Oaktree Term Loan outstanding at September
30, 2026, including amortization of discount and debt issuance costs and, through August 7, 2026, accretion of the exit fee, of $9,728
and $10,288 for the nine months ended September 30, 2026 and the year ended December 31, 2025, respectively. The amount for the year ended
December 31, 2025 is the portion of interest expense on the Oaktree Term Loan attributable to the $62,500 of principal outstanding from
July 2025 through August 7, 2026 (before the $3,125 Amendment No. 5 fee was added to principal); the Oaktree Term Loan was funded at $125,000
on February 26, 2025 and reduced to $62,500 by June 30, 2025, and the adjustment reflects interest from the funding date. Interest on
the continuing Oaktree Term Loan after the modification is reflected in note (h). |
| f. | Reflects the estimated income tax effect of the pro forma adjustments to the statements of operations
at the Company’s blended federal and state statutory income tax rate of 26.1%, which includes the federal rate of 21.0% and the state
rate of 6.5%, adjusted for the federal benefit: $2,178 of expense for the nine months ended September 30, 2026 and $907 of benefit for
the year ended December 31, 2025 on adjustments (c), (d), (e) and (h). No income tax effect is reflected in the pro forma balance sheet;
the loss on partial extinguishment and the transaction costs in (c) are reflected in accumulated deficit on a pre-tax basis. The rate
does not consider the Company’s valuation allowance, the tax basis of its interest in GA Holdings or its effective tax rate, which could
differ significantly. |
| g. | Reflects the additional term loans of $26,500 advanced under the Facility Amendment, the proceeds of which
are available for general corporate purposes, including potential acquisitions and other strategic transactions, less the closing fee
of $530 (2.0%), for net cash proceeds of $25,970, and the $3,281 transaction fee added to the principal of the existing term loans. The
additional term loans and the transaction fee are part of the continuing Oaktree Term Loan described in Note 2. The transaction fee, the
closing fee and lender counsel fees of $27 reimbursable to Oaktree are recorded as a discount and amortized as interest expense (see note
(h)). The transaction fee is paid in kind and the closing fee is netted from the proceeds; of these fees, only the lender counsel fees,
which are not netted, are accrued in accrued expenses and other liabilities at closing. |
| h. | Reflects interest expense on the continuing Oaktree Term Loan, including
the $26,500 of additional term loans, of $7,930 and $8,947 for the nine months ended September 30, 2026 and the year ended December 31,
2025, respectively, at an effective interest rate of 27.2% on the carrying amount of $38,844 after the modification plus $160 of accrued
interest carried forward (see Note 2), which includes the accretion of the unamortized discount, the transaction fee, the closing fee
and lender counsel fees. For the year ended December 31, 2025, interest is computed from February 26, 2025, the date the Oaktree Term
Loan was funded, consistent with the historical interest eliminated in note (e). The continuing Oaktree Term Loan bears interest at three-month
term SOFR plus 8.0% (11.8% for the interest period beginning August 27, 2026). A one-eighth percentage point change in the contractual
interest rate applied to the $43,727 principal balance of the continuing Oaktree Term Loan would change pro forma cash interest expense
by approximately $41 for the nine-month period and $55 for a full-year period. |
