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Embattled food franchisor behind brands like Gloria Jean's, Donut King, and Michel's Patisserie, Retail Food Group (ASX: RFG) has launched a capital raise to secure $150 million.
The funds are part of the group's recapitalisation plans, with $118.5 million of proceeds from the offer to go toward repayment of debt.
As part of the raise the company's lenders have agreed to extinguish $71.8 million on receipt of the $118.5 million, and to provide a new $75.5 million term loan facility to refinance existing senior debt.
The raise is comprised of an institutional placement of approximately 1,500 million ordinary shares at $0.10 per share.
This is a significant discount to the company's current trading price of $0.17 per share.
RFG also plans to offer a share purchase plan at $0.10 per share to raise a further $10 million before costs.
In total, the $160 million will go toward debt, and provide working capital to stabilise the business and support the company's turnaround plan.
The raise follows Retail Food Group's $149 million FY19 loss amid store closures and a challenging year for the business.
Close to $100 million of that loss can be explained by write-downs of brands and goodwill, along with $35.2 million in restructuring costs as RFG eliminated redundant roles and closed unprofitable outlets.
The operator of such household name brands as Brumby's Bakery, Pizza Capers, Donut King, Gloria Jeans and Michel's Patisserie shut down 173 stores in the year, including 130 outlets and 43 coffee vans following a store network reset.
RFG was slammed earlier in 2019 by a Parliamentary inquiry into Australian franchise business.
The committee said RFG "damaged the reputation of franchising" in Australia, and that the franchisor took advantage of the power imbalance implicit in the franchisor-franchisee relationship.
The company's share price collapsed by 20 per cent following the report's release.
Since then, the company was continually battered by a series of bad news, including the group's failure to divest the Donut King brand, a sticky expose by the Sydney Morning Herald containing allegations that the company extended the use-by dates on products used by its franchisees, and ASX concerns about the sudden lift in its shares in July this year.
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