Shares in Gold Coast franchisor Retail Food Group paused as investors await result of $160m recapitalisation plan

Embattled Southport franchisor Retail Food group has confirmed it has approached ASX investors for help with its debts as investors await news of a proposed $160m rescue package for the company.

The offices of RFG at Olympic Circuit in Southport appear very quiet. Picture Glenn Hampson

SHARES in embattled Southport franchisor Retail Food group were paused from trading as the company confirmed it had approached ASX investors for help with its overwhelming debts.

Shareholders have been waiting for the company to reveal whether or not it would receive $160 million in rescue funding from Sydney group Soliton Capital Partners.

The funding is seen as a lifeline for the struggling company, which has $262 million in secured loans due for payment next month, however a number of media reports have cast doubt on whether the deal will proceed.

RFG shares had closed at 18.5c on Tuesday and dropped another 5.4 per cent to 17.5 cents on Wednesday after resuming trade.

After trading was paused, the company confirmed an article in The Australian newspaper which said it had approached fund managers about an equity raising exercise.

“RFG confirms that it is currently meeting with investors in relation to a potential equity raising,” it said in a statement to the ASX.

“No decision has been made by the Board as to whether to proceed with an equity raising at this stage.

“Discussions are continuing with Soliton in relation to its proposal. No decision has been made by the Board at this time.

“The Board continues to consider various options and a further update will be provided in due course.”

Soliton is backed by Hong Kong credit and special situations firm SSG Capital Management.

Retail Food Group executive chairman Peter George. Photo: Supplied

RFG halved its losses from last financial year to post a still-staggering $149.26 million net loss for 2018-19.

In an announcement after the market closed on August 30, RFG reported revenue of $349.77 million, down 6.5 per cent from the $374.03 million logged last year, with underlying earnings down 28.9 per cent to $50.73 million from $71.36 million.

The net loss recognised $185.2 million in writedowns and restructuring costs.

It said it had asked for, but was yet to receive, further extensions on lending covenants for $262 million in secured loans and that it had been ordered by two federal agencies to hand over documents as part of investigations into whether it breached the Corporations Act and Australian Consumer Law.

Its loans are due for repayment on October 31.

At the time RFG said it was “well advanced” in raising up to $160 million in funds to pay down debt, either through the further financing package with Soliton or a new equity raising.

“The group will also seek to agree a new financing facility for the residual debt with the existing syndicated debt lenders as part of a comprehensive funding program, in conjunction with the Soliton proposal or the new equity raising, or other potential financing,” RFG said.

The company said it was aiming for costs savings of $20 million a year as it looked to relieve its debt and revealed 173 domestic outlets had closed during the financial year.

Fiona Sang prepares one of the last batches of cinnamon donuts as the store prepared to close its doors at Casuarina Square.

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RFG has battled for 20 months to recover from a volley of hits to its reputation and financial situation after franchisees, and then a parliamentary inquiry, revealed its business model had exploited franchisees.

In March RFG’s lenders, NAB and Westpac, agreed to waive a key review of its loan conditions that had hung over the company since the end of February.

Talks with a potential buyer for Donut King and Crust, as well as fellow brand Pizza Capers, collapsed in April after RFG said the proposed price for the chains was too low.