Retail Food Group’s lenders waive conditions on $250m debt until end of March next year

STAFF and shareholders of Gold Coast franchisor Retail Food Group can relax a little over Christmas after the company’s lenders handed it another lifeline on its mountain of debt. But it’s not a permanent fix.

RFG shareholders can relax for another three months.

STAFF and shareholders of Gold Coast franchisor Retail Food Group can relax a little over Christmas after the company’s lenders handed it another lifeline on its mountain of debt.

RFG said in an ASX statement that its lenders had agreed to waive testing of the company’s financial covenants for its loans for the period to December 31.

It followed a similar waiver in June that covered the financial year.

Financial covenants under the company’s senior debt facilities are now due to be tested using the period ending March 31.

RFG CEO RESIGNS AFTER SEVEN MONTHS

A Brumby's bakery store.

The company said it remained focussed on its balance sheet position and continued to assess a range of alternatives to reduce debt, including potential asset sales.

The company has reportedly been looking for buyers for some of its brands which include Donut King, Gloria Jeans, Brumbys Bakeries and Pizza Capers.

The company has been under strict obligations including: 60 per cent of net proceeds of any asset disposal to be applied to repayment of debt; any variance from quarterly underlying pre-tax earnings of more than 20 per cent to trigger a breach of the covenants; and an operating ratio of three times debt to pretax earnings.

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Richard Hinson resigned as Retail Food Group CEO after seven months.

New chairman Peter George told shareholders at the annual general meeting that the company was not earning enough to meet its debt obligations and would have to take drastic action.

“Do the banks want to take RFG over and sell those assets into a buyer’s market? No,” he said.

“Are they happy with the proposal we’ve put to them? So far, yes they are.

“They’re going to require some tangible evidence in the next couple of months to maintain that, but provided those initiatives proceed as we think then I have every reason to think the banks will allow us to restructure — but nothing’s certain.”

RFG had $259.7 million of net debt as of the end of last year.

The company, under the terms of its debt covenants, must still achieve a minimum budget for FY19 of underlying pretax earnings of $90 million. The company made a pre-tax loss of $367.4 million in FY18.