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Retail Food Group attempting to crawl out of the pit into which it threw itself

Retail Food Group attempting to crawl out of the pit into which it threw itself

Floundering food conglomerate Retail Food Group (RFG), parent of Donut King, Pizza Capers and Michel’s Patisserie among other well-known companies, announced a fund drive to raise $150 million and save the firm. Business New Australia reports that $118.5 million of that money will be used to repay debts:

“As part of the raise the company’s lenders have agreed to extinguish $71.8 million on receipt of the $118.5 million, and to provide a new $75.5 million term loan facility to refinance existing senior debt.

“The raise is comprised of an institutional placement of approximately 1,500 million ordinary shares at $0.10 per share.

“This is a significant discount to the company’s current trading price of $0.17 per share.

“RFG also plans to offer a share purchase plan at $0.10 per share to raise a further $10 million before costs.”

For some context, RFG registered a loss of $149 million in fiscal year 2019, which saw the failing business close down 173 stores. As Business New Australia explains, the bulk of that loss (around $100 million) can be ascribed to “write-downs of brands and goodwill, along with $35.2 million in restructuring costs as RFG eliminated redundant roles and closed unprofitable outlets.”

In a scathing assessment, a Parliamentary inquiry recently claimed RFG “damaged the reputation of franchising” by abusing the power it wields over companies under its aegis. The effect, as Business News Australia states, was profound:

“The company’s share price collapsed by 20 per cent following the report’s release.”

Whether RFG can recover is an open question; whether they deserve to is perhaps less open.

About John Christie

I read and write about (mostly Australian) business, politics, culture and the like. In other words, whatever happens to catch my fancy at a given moment. George Orwell wrote a column called "As I Please," in which he scribbled about whatever was on his mind. Think of me like that--only, you know, without the literary brilliance.