RFG confirms equity raising plan

RFG plans to concentrate on its core brands, including coffee outlet Gloria Jean’s Picture: Stephen Laffer

Michel’s Patisserie and Gloria Jean’s franchisor Retail Food Group has confirmed that it has been moving to embark on an equity raising.

The company released a statement Tuesday confirming reports in The Australian’s DataRoom that the company has been meeting with investors in relation to a potential equity raising.

It is understood that the company was in search of $160 million.

The market value is currently $33.8m.

In a statement to the Australian Securities Exchange, RFG said the board was considering a range of debt reduction options, including equity and debt funding options as well as asset sales.

“RFG confirms that it is currently meeting with investors in relation to a potential equity raising. No decision has been made by the board as to whether to proceed with an equity raising at this stage.”

The company also said that discussions were continuing with Australia-based specialist fund Soliton in relation to its proposal for a $160m recapitalisation.

Shaws and Petra Capital have been working on the planned raise and shares were being offered for a price as low as 1c or 2c.

RFG’s share price closed at 18c on Tuesday.

As reported in DataRoom on Tuesday, the move to raise equity on the Australian Securities Exchange throws further doubt on Soliton’s proposed recapitalisation.

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.

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.

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.