Gold Coast food franchisor Retail Food Group in talks with investment firm on recapitalisation of struggling company

Gold Coast food franchisor Retail Food Group has revealed it is in talks with an investment fund that could rescue the beleaguered company from its mountain of debt.

A proposal from Soliton Capital Partners could rescue Retail Food Group from its massive $260 million debt pile. Photo: iStock

GOLD Coast food franchisor Retail Food Group has revealed it is in talks with an investment fund that could rescue the beleaguered company from its $260 million debt hole.

The company issued a statement to the ASX this afternoon in response to an article published by Nine Newspapers.

It said it has received an “indicative non-binding proposal” from Sydney-based investment firm Soliton Capital Partners to provide $160 million to recapitalise the company.

“However, the indicative proposal remains subject to a number of conditions … including the completion of detailed due diligence and there is no guarantee that any formal agreement will be reached,” RFG told the market.

Retail Food Group tried and failed to sell its Pizza Capers brand earlier this year. AAP Image/Dan Peled

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“RFG has granted Soliton Capital Partners limited exclusivity while discussions continue and further due diligence is being undertaken.

“Any formal recapitalisation proposal......is expected to include debt and equity/equity-linked components and may be dilutive to existing shareholders.”

Any dilution, under which Soliton would emerge as the major shareholder, would be bad news for investors who have already seen the stock price crash to as low as 12.5¢, although it had gained ground since Friday to close at 21.5¢ yesterday.

RFG attributed the massive spike in the share price (up 20 per cent on Friday and a further 29.4 per cent on Monday) to comments chairman Peter George made in an article published last week on the company’s turnaround strategy.

Former Retail Food Group CEO Tony Alford and senior executive Alicia Atkinson front the joint parliamentary inquiry into franchising earlier this year. Picture: Gary Ramage

Any recapitalisation backed by Soliton would help RFG pay down its debt, which stands at $260 million, and is due to be refinanced later this year.

RFG has struggled to find buyers for its brands, which include Pizza Capers, as it seeks to pay down debt.

In April the share price dived when the company announced negotiations to sell Donut King, Pizza Capers and Crust had collapsed.

Retail Food Group has had a revolving door of executives including former managing director Andre Nell (pictured) since media reports emerged of exploitation of franchisees. Picture: Richard Gosling

RFG was highlighted as a key player in a scathing joint parliamentary inquiry, which recommended past and present bosses be investigated for possible insider trading and other crimes. It faces the looming threat of its lenders calling in loans worth more than its market capitalisation, and continued to attract negative publicity by instructing franchisees to serve out-of-date food.