Retail Food Group has confirmed it is in “advanced talks” with a Hong Kong-owned investment firm over a deal to cut its debts by $160 million, a day after telling the market it was still exploring a range of options.
RFG on Monday told the ASX it was looking at options including “debt funding proposals” after the share market operator asked it to explain an abnormal surge in share price and trading volumes.
But after the market closed on Tuesday, the troubled Gloria Jeans and Donut King franchisor responded to media reports that it was sitting on more detailed information by announcing it had received an indicative non-binding recapitalisation proposal from Soliton Capital Partners that would dilute existing shareholdings.
RFG, which in February reported a first-half loss of $111 million, had initially told the ASX it was not aware of any price-sensitive information that could have sent its shares to a near two-month high.
But the Sydney Morning Herald and Age newspapers reported that restructurers were dealing exclusively with an unnamed local fund and that competing bidders had been told their proposals were no longer being considered.
RFG subsequently said Soliton had not completed detailed due diligence but had been granted “limited exclusivity”.
It also announced that talks over the sale of one of its non-core assets are at an advanced stage.
RFG’s share price collapsed in 2017 after it was accused of badly mistreating franchisees, and a parliamentary inquiry this year said management had been either “unethical” or “incompetent”.
The inquiry into franchising’s final report said Retail Food Group had damaged the reputation of franchising in Australia and should be investigated by the competition regulator, the corporate regulator and the Australian Taxation Office.
The company’s shares had been worth more than $7 at the start of 2017 and hit an all-time low 12.5 cents on June 27 following a series of heavy losses.
But after a week of modest gains, they surged 21.4 per cent on Friday and another 29.4 per cent on Monday.
They were worth 21.5 cents before the market opened on Wednesday, up 72 per cent over eight sessions.