NAB offloading Retail Food debt

The National Australia Bank is believed to be testing buyer appetite for the loans it has made to the troubled Retail Food Group, which booked hefty losses for the six months to December and announced the closure of up to 200 stores.

It is understood the NAB stake has been offered around the market to prospective buyers, although sources close to the bank rebuffed the suggestions.

But there is talk the lender remains eager to distance itself from the challenges playing out within the retail sector.

Global hedge funds such as Varde, Apollo, Oaktree and Carlyle have been eager to capitalise on opportunities in Australia in various sectors, including mining services, where they can snap up the loans for as little as 50c in the dollar and profit at a later stage.

RFG is a franchisor of brands including Gloria Jean’s, Donut King, Michel’s Patisserie and Brumby’s Bakery. According to its accounts, it has net debt of $259.7m with a $319m facility.

RFG counts Westpac and NAB as its lenders but sources say NAB has all the exposure.

Some parties are also said to have been sounded out about a potential acquisition of the group, but sources close to RFG said the business was not for sale.

NAB did not comment.

Australia’s top four banks round off their half-year accounts at the end of this month, and a sale of the debt could prevent a writedown of the asset in the accounting period.

Last week the company unveiled a $87.8 million loss following a profit warning in January after it was accused last year of mistreating franchisees.

Also looming is a potential class action against the business.

Meanwhile, Luminis Partners is working on a sale of Specialty Fashion Group, which owns brands including Katies, Millers, Rivers, Crossroads and City Chic.

Noni B, backed by Alceon, is in the contest to acquire the operation. The game plan for Noni B is said to be acquiring the business and later finding a partner to take out City Chic, which would not be the right fit for the Noni B stable.

Former managing director Gary Perlstein and chairman Geoff Levy are said to be eager to acquire City Chic and Autograph — reportedly for $75m — so their plan could work in well with Noni B’s.

Private equity firms are also likely to be eager to partner with Noni B to buy City Chic, a plus-sized women’s brand that has an international presence.

Analysts believe it has strong expansion and earnings growth potential in what is a less crowded fashion category.

SFG had about 1000 stores but has said about 300 are earmarked for closure.