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.
