Tainted Buyout Looms Over Lender Brawl in FRG Insolvency (1)

Behind a fight to control the bankruptcy of Franchise Group Inc. looms a tainted management buyout of the brand management company that involved the beleaguered investment adviser B. Riley Financial and controversial executive Brian Kahn.

Second-lien lenders, including Pacific Investment Management Co., are fighting for the right to sue managers who lead the buyout, which closed just 14 months before the bankruptcy case was filed in early November. That group of directors and officers likely includes Kahn, FRG’s former chief executive, who faces scrutiny from US authorities over his alleged role in the collapse of hedge fund Prophecy ...