Retail Food Group shares: details of a $150m equity raise emerge

Today it was revealed that the troubled, yet iconic Retail Food Group (ASX: RFG) was potentially pursuing a capital raise to the tune of A$150 million.

That was according to the Australian Financial Review (AFR), at least. Here, the newspaper noted this morning that:

‘The franchisor is seeking to raise $150 million via a placement and another $10 million in a share purchase plan.’

The AFR continued, stating that the:

‘Funds raised would be used to repay $120 million debt and RFG's lenders have agreed to write down $72 million of the senior debt as part of a $75 million refinancing.’

For reference, RFG’s market capitalisation has shrunk to just A$31.07 million.

A swift response

RFG responded quickly to the speculation of a cap raise, requesting its stock be put in a trading halt this morning, pending an announcement.

According to today's media release, RFG's shares 'will remain in trading halt until the earlier of the commencement of normal trading on Tuesday, 15 October 2019 or when the announcement is released to the market.'

Today’s news of a potential A$150 million capital raise comes after a separate media release late last month, where it was noted that RFG was:

‘Currently meeting with investors in relation to a potential equity raising. No decision has been made by the Board as to whether to proceed with an equity raising at this stage.'

RFG share price in focus

When considering all of this, in addition to RFG’s horror run over the last couple of years, a potential capital raise should come as little surprise.

Store closures, a suspended dividend and mounting losses have done little to incite shareholder enthusiasm. Even the company’s string of iconic brands, including Brumby's Bakery, Donut King, Gloria Jean's Coffees and Michel's Patisserie – couldn’t protect it from what many have cited as a problematic business model.

It shows in the share price action

Since January, the Retail Food Group (ASX: RFG) share price has fallen a staggering 43%, to A$0.17 per share.

That mind you, isn’t even the worse of it. In September 2016 – before news of RFG’s issues began to emerge – the stock traded above the A$7 per share mark.

Had you bought at those price levels and held until today, you would potentially be down a cool 97%.

The AFR noted that new RFG shares would be priced at just A$0.10.

These shiny new prices are relatively below the current price; and a far, far cry from where RFG traded just a couple of years ago.

It will be interesting to see how the market reacts on or before Tuesday.

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