$160m RFG recapitalisation offer confirmed

By Nick Hall | 10 Jul 2019 View comments

In a stunning announcement, embattled franchisor Retail Food Group (RFG) has confirmed specialist fund Soliton Capital has proposed a $160m recapitalisation of the multi-brand business. Soliton’s RFG recapitalisation offer could put an end to the company’s ongoing debt struggles.

In a statement posted to the ASX, the Gloria Jeans, Donut King and Crust franchisor revealed that while no agreement had been made between the parties, discussions were developing.

“RFG advises that it has received an indicative, non-binding proposal from Soliton Capital Partners, an investment fund associated with SSG Capital Management, to provide approximately $160m to recapitalise the company,” the statement read.

“Discussions in relation to this proposal are advanced. However, the indicative proposal remains subject to a number of conditions precedent, including the completion of detailed due diligence, and there is no guarantee that any formal agreement will be reached.”

RFG share price surge

The announcement comes just days after RFG was forced to answer speculation over a surge in its share price.

On Monday, the company’s shares soared to a near two-month high, prompting speculation from ASX Listing Compliance advisors.

Senior advisor Elvis Onyura questioned RFG if the company was aware of any information not yet know by the market which could explain the “significant” rise.

RFG denied all knowledge, instead suggested comments made by its executive chairman Peter George in a news.com.au article on Friday afternoon were behind the sudden surge.

RFG recapitalisation

Soliton’s $160m RFG recapitalisation offer comes at an interesting time for the brand.

In June, law firm Corrs Chambers Westgarth announced a possible class action suit against the company, after investigations into the business practices of RFG branded chain, Michel’s Patisserie.

The class action proposal compounded ongoing concerns over RFG’s financial covenants, which the company successfully renegotiated back in April.

The move was the fourth such escape over 12 months, however Tuesday’s RFG recapitalisation announcement may help bolster the brand’s debt recovery efforts.

With yet another financial covenant review upcoming, RFG has revealed existing strategies are progressing.

RFG asset sales

The RFG recapitalisation announcement also confirmed the company’s plans to potentially put big brands on the block.

For months, the media has speculated that company stalwarts Donut King, Pizza Capers and Crust were up for sale, despite no formal agreement being reached.

On Tuesday, RFG reiterated that its debt reduction strategy discussions were ongoing.

“As indicated in its 1H19 Results, RFG has also been exploring options for potential divestment of its non-core assets,” RFG said.

“Discussions in relation to the sale of one of those non-core assets are at an advanced stage, but there is no guarantee that any formal agreement will be reached.”

The company revealed that a further update will be provided to the market “in due course”.