A special situations fund — believed to be either Oaktree Capital Management or Soliton Capital Partners — is understood to have offered a lifeline to Freedom Foods in what could see a move to tap the equity market placed on ice.
Oaktree, which is based in Los Angeles, is no stranger to the Australian market, embarking on recapitalisation plans involving local high-profile companies, while Soliton Capital is an Australian-based special situations firm run by former Macquarie bankers Jean-Phillippe Gaillard and Jan-Paul Kobarg.
Working for Freedom Foods is advisory firm Moelis, law firm Ashurst and PwC.
It is understood that approaches have been received not only by special situation funds for Freedom Foods, but also industry groups looking to buy a division of the business.
Sources say Freedom Foods has been making efforts to sell its muesli bar business and had approached potential buyers, which would likely include groups such as Uncle Toby’s, Arnott’s Biscuits, Carman’s and Sanitarium.
That business operates out of its Leeton factory in NSW.
Freedom Foods also owns plants in Dandenong, Victoria, where it also produces cereal and oat products.
It produces its UHT dairy products in a factory in Shepparton and it also has an operation based in Ingleburn, where its plant-based products are produced.
Citi analysts said in a research note that Freedom Foods had net plant and equipment worth $589m.
Some believe that a recapitalisation of Freedom Foods could include various solutions, which may include the sale of a division, funding provided by a special situations fund and even a sale and leaseback of some facilities to a real estate group such as Charter Hall.
Earlier, the company had been in the process of selecting an investment bank for a potential capital raising, but the understanding is that a capital raising through the equity market appears increasingly challenging with a class action looming.
The company’s shares are yet to trade since it suddenly announced the departure of key management staff.
It announced accounting irregularities relating to out-of-date stock in the middle of the year, sending its shares more than 20 per cent lower before they were halted.
Freedom Foods has been running a dual track process to determine whether the company is better off embarking on an equity raising or securing additional funds through a convertible debt instrument.
A convertible bond is one way the company can get around any additional equity secured being spent on the funding of a class action.
The dairy and cereal producer is in need of about $200m and the company has reached a standstill agreement with its lenders.
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