Michel’s Patisserie and Gloria Jean’s franchisor Retail Food Group is understood to be trying to raise equity on the Australian Securities Exchange in a move some believe could throw further doubt on a proposed recapitalisation plan by Soliton Capital.
It is understood that fund managers have been approached by RFG management in recent days, and the management has been promoting the company’s turnaround program and asking for financial support to execute the company’s strategy.
An equity raising was supposed to be unveiled this week, according to sources.
While delivering its full-year results last month, RFG outlined a six-point plan for an improvement in its performance, which included refocusing the group on its core food and coffee franchising and divesting non-core operations. It also hopes to strengthen its balance sheet, improve the health of the domestic franchise network, leverage its Di Bella coffee franchise competencies and drive growth in the franchise business.
An equity raising could be the last resort for RFG, whose future is at the mercy of its lenders.
Australia-based specialist fund Soliton is still believed to be embarking on due diligence to determine whether it will follow through on a $160m recapitalisation of RFG, but many believe it is unlikely to proceed.
RFG’s banks include NAB and Westpac, and the lenders have been placing pressure on the company to sell assets.
The listed group has net debt of $259.7m.
On the market with the help of insolvency firm KordaMentha earlier had been its Crust Pizza and Donut King brands, with potential buyers PAG Asia and Allegro Funds Management both walking away.
The company is fighting to survive in the wake of a government inquiry into the industry that was designed to lift standards among franchising operations, including ending the underpayment of staff.
Also hanging over RFG’s head is a looming class action and likely fines from the Australian Competition & Consumer Commission over its treatment of franchisees.
As well, retail and consumer spending remains weak.
For the 2019 financial year, RFG generated $50.7m in earnings before interest, tax, depreciation and amortisation as it made a $149.3m bottom line loss linked to impairments and restructuring costs.
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