Retail Food Group brushes ASX concerns under the rug

Retail Food Group brushes ASX concerns under the rug

The franchise operator of Brumby's Bakery, Michel's Patisserie, and Gloria Jeans, Retail Food Group (ASX: RFG), has responded to the concerns of the ASX regarding a sudden and unexpected lift in shares last week.

RFG said last week that the sudden lift in shares can be attributed to media speculation about its turnaround strategy.

The embattled company then announced that strategy to the ASX itself; the company hopes to be saved by a $160 million injection of capital from Sydney Based Soliton Capital Partners.

Evidently the ASX was not convinced by RFG's attempts to paint the lift in shares as the result of media speculation and has demanded the company explain what is really going on.

But in a response to the ASX's questions posted this morning by RFG the company is standing by its story that nothing untoward is happening.

In response to the ASX asking RFG if it considered the capital injection from Soliton to be something that would have a "material effect" on its securities the franchisor says that it had already announced that fact in the past.

In fact, the company says that it does not consider the announcement regarding the Soliton injection to have a material effects on its shares at all.

The group points to five instances where the company previously announced that it was exploring options for the reduction of its debt. These occurred on 14 January 2019, 31 December 2018, 29 March 2019, 3 April 2019, and 8 July 2019.

"RFG considers that the material information in relation to the recapitalisation proposal is the fact that RFG is exploring a range of debt reduction options (including equity and other debt finding proposals)," says RFG.

"Given the indicative and non-binding nature of the proposal received from Soliton Capital Partners, in RFG's view, there is no new material information contained in the information. Rather, the information provides colour on the progress of discussions on debt reduction options being explored by RFG."

"Any additional information provided in the announcement of 9 July 2019 was provided to the market to confirm or, where inaccurate, correct media reporting on the afternoon of 9 July 2019, in order to ensure that there was not a false market in RFG's securities."

The proposed recapitalisation would be enough to cover the $158 million in total liabilities recorded by the company in its first half financial results.

However, it is yet to be seen how much improvement was made in the second half after a dismal $111.1 million loss in the preceding period.

RFG's current market capitalisation stands at $39.2 million, with the group still reeling from the effects of a scathing report from a parliamentary inquiry into franchising.

In April, the entity failed to reach an acceptable agreement to offload its Donut King and quick service retail (QSR) brands, which would have helped pay down debt.

A month later the company was in the spotlight again for all the wrong reasons after sending a memo to franchisees to extend expiry dates on packaging, only to then reverse the decision and start withdrawing the supplies.

Shares in RFG are down 6.82 per cent to $0.20 per share at 12.26pm AEST.

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