Retail Food Group upsizes capital raise

Retail Food Group upsizes capital raise

Embattled food franchisor behind brands like Donut King, Michel's Patisserie, and Gloria Jean's, Retail Food Group (ASX: RFG) has boosted its capital raise to recapitalise the company.

Initially, RFG intended to raise $150 million from a fully underwritten placement in order to repay debt, plus an extra $10 million from a share purchase plan.

The group now plans to raise $170 million as part of a fully underwritten placement of 1,700 million ordinary shares at $0.10 per share.

RFG has also buffed up its share purchase plan from $10 million to $20 million.

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.

In total, the $190 million will go toward debt, and provide working capital to stabilise the business and support the company's turnaround plan.

RFG executive chairman Peter George says the raise has already received significant support.

"We are delighted with the support received for the Placement and welcome a number of highly credentialed and supportive institutional investors to the shareholder register," says George.

"The Board would like to thank its existing shareholders, franchisees and other stakeholders for their ongoing support throughout the recapitalisation and restructuring process. The recapitalisation is transformational for the RFG business and will allow the RFG team to continue to harness the underlying value of the franchise network and enhance franchisee profitability."

RFG expects underlying EBTIDA in FY20 to be in the ballpark of $42 to $46 million.

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.

Shares in RFG are down 14.71 per cent to $0.14 per share at 11.25am AEST.

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