The Australian Securities and Investment Commission (ASIC) will be keeping a close eye on embattled franchisor Retail Food Group (RFG) following last week’s recapitalisation reports. The corporate regulator will review a potential RFG breach of the ASX disclosure rules regarding the announcement.
Earlier in the week, RFG’s share price surge raised questions, prompting the ASX to issue a ‘please explain’. The franchisor said it was not aware of any price-sensitive information that could have led to the near two-month high.
However, just days later, RFG revealed it was providing extensive information to Hong Kong based capital firm Soliton Capital.
Now, ASIC is questioning the delivery.
RFG breach
On Wednesday, ASIC told AAP it would review the chain of events and whether RFG acted within disclosure rules.
The rules require listed companies to immediately announce any information that might materially affect their share price.
Tuesday’s recapitalisation announcement raised enough doubt for the ASX to send RFG another “please explain” email.
In response, RFG suggested that it didn’t believe Soliton’s non-binding proposal “to be information that a reasonable person would expect to have a material effect on the price or value of its securities”.
“Given the indicative and non-binding nature of the proposal received from Soliton Capital Partners, in RFG’s view, there is no new material information contained in the information,” RFG said in a statement posted to the ASX.
“Rather the Information provides colour on the progress of discussions on debt reduction options being explored by RFG.”
RFG asset review
RFG has in the past announced plans to unload some portfolio assets. The franchisor currently operates the Gloria Jean’s Coffees, Brumby’s Bakeries, Donut King, Michel’s Patisserie, Di Bella Coffee, The Coffee Guy, Café2U, Pizza Capers and Crust Pizza brands.
As the company continues to explore options to recover its mountain of debt, asset sales remain a chief target.
In addition to the Soliton offer, RFG also revealed it was in advanced discussions related to the sale of one of its non-core assets.
Regardless, an ASIC investigation could threaten to put a halt to the proposal, placing RFG in a delicate position leading up to a financial covenant review.