Retail Food Group said tapping shareholders for equity is just one of several options on the table as the Donut King and Gloria Jeans owner attempts to drag itself out of the financial mire.
The company – which has suffered huge losses amid wide-ranging reputational and regulatory issues over the past two years – said no decision had been made about an equity raising, though it remained an option.
“As previously announced, the board is considering a range of debt reduction options, including equity and debt funding options as well as asset sales,” Retail Food Group said in a release.
The Michel’s Patisserie, Brumby’s, and Pizza Capers franchisor paused trading on the ASX at Wednesday’s open amid media speculation its proposed $160 million recapitalisation with Soliton Capital was in doubt.
The company said talks with Soliton were ongoing.
RFG previously called the discussions with Soliton “advanced”, but that the deal remained subject to a number of conditions which are required to first be met.
“There is no guarantee that any formal agreement will be reached,” RFG previously said in a statement to the ASX.
Nonetheless, shares in Retail Food dropped another 2.7 per cent to 18 cents after resuming trade at 1048 AEST.
RFG’s share price has collapsed during the past two years after it was accused of badly mistreating franchisees, and a parliamentary inquiry this year said management had been either “unethical” or “incompetent”.
The company’s shares had been worth more than $7 at the start of 2017 and were still valued at $4.40 in December that year.
Retail Food slumped to a $150 million loss in FY19 after another horror year, driven by $185.3 million in impairments and provisioning expenses.
This followed an impairment-driven loss of $306.7 million the year before.
Its net debt was about $260 million at June 30, while its current market capitalisation is $33 million.
Retail Food also caught the attention of corporate regulators in July, who were concerned with the manner in which it announced the potential Soliton recapitalisation.
Typically, a business would order a trading halt before making such an announcement in an effort to curb the excess buying or selling of shares.
The day before the announcement, RFG stated it had no idea why shares had jumped from 13 cents per share on July 1 to 21 cents a share on July 9. A day later, the business announced it was in talks with Soliton – potentially providing a way out of its debt issues.
In response to this, the company has been asked to hand over documents to both ASIC and the ACCC as agencies investigate whether the company breached corporate law.
