Debt relief for Gold Coast food franchisor Retail Food Group

Executives at embattled Gold Coast food franchisor Retail Food Group have received some more good news following a share rally over the past few days.

EXECUTIVES at embattled Gold Coast food franchisor Retail Food Group have received some more good news following a share rally over the past few days.

The company has announced its lenders, NAB and Westpac have agreed to provide a waiver for a key review of its financial covenants that has hung over the company since the end of February. RFG owes more than $250 million and the waivers are crucial to enable the company to continue as a going concern.

In addition covenants relating to the company’s operating leverage ratio, which divides the contribution margin by net operating income, and interest coverage ratio, which is used to determine how easily a company can pay interest on its outstanding debt, have also been reset for the period to March 31 and the balance to October 31.

Shares in the company closed 6.25 per cent higher at 25.5c after the announcement.

Southport-based Retail Food Group has a mountain of debt with its lenders owed more than $250 million. Picture: Glenn Hampson

RFG said its FY19 earnings guidance will take into account these new terms.

“The board also continues to explore a range of options to reduce debt, including equity and other debt funding options, and potential asset sales,” it said in a statement.

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The company’s share price, which remains far below its 52-week high of $1.095 has rallied in recent days, climbing as high as 27.5c from a low of 16c last Thursday.

As of 2.30pm this afternoon, the share price was 1c, or 4.16 per cent higher, at 25c.

Retail Food Group is exploring sales of its assets including Pizza Capers.

The buying followed speculation this week RFG was moving to sell off its Dairy Country business separately as negotiations continue on the sale of its Donut King, Pizza Capers and Crust brands, which it has valued at $87.34 million after lease liabilities of $45.79 million.

Asia-based private equity group PAG is reported to be negotiating to buy all three.

Insolvency firm KordaMentha was understood to have been hired to assess options for Retail Food Group’s Hudson Pacific bakery business and to examine its balance sheet.

The Dairy Country operation, a high volume cheese distributor, sits within Hudson Pacific, which RFG bought for $88 million — $55 million cash and $33 million in RFG shares — in 2016.

The company reported an $111.1 million net loss for the first six months of the financial year and has had repeated lifelines from its lenders, owed more than $250 million.