Retail Food Group Provided An Update On The Debt Facilities; Stock Zoomed Up By 6.25%  

  • Mar 29, 2019 AEDT
  • Team Kalkine
Retail Food Group Provided An Update On The Debt Facilities; Stock Zoomed Up By 6.25%  

Retail Food Group Limited (ASX: RFG) is a global food & beverage company. It is also one of the largest multi-brand retail food franchise owners; a roaster and supplier of high-quality coffee products in Australian region. The company is an emerging leader in the foodservice, dairy processing and wholesale bakery sectors.

On 29 March 2019, the company announced that it has renegotiated its financial covenants, with its lenders under the senior debt facilities. It has also received a waiver based on the potential Review Event which was to be commenced after 28 February 2019.

The Operating Leverage ratio, as well as the Interest Cover ratio, have been reset which will be applied to the period ending 31 March 2019, and for the remaining facility term until 31 October 2019. The level of these reset covenants will be accommodated in the FY2019 earnings guidance for the company.

The board of the company would keep on exploring options, where they can reduce debt, which will include equity, other debt funding options, and potential asset sales, as per the announcement.

In its FY18 report ended 30 June 2018, released on 31 August 2018 on ASX, the company mentioned that is has agreed with its senior debt lenders to reset covenants effective from 31 August 2018.

The key terms of the covenant are as follows: All the financial covenants were to be measured quarterly, starting from 30 September 2018. The operating leverage which was 3.0x previously, had increased to 5.0x to December 2018, 4.5x to March 2019 and 4.0x from 1 April 2019 onwards. The interest coverage ratio from the previous 4.0x was reset to 3.0x. In case of disposal of any asset, 100% of the net proceeds to be applied to the repayment of the debt. The operating leverage dropped down from 60% to 2.5x. The prior financial covenant for gearing, financial guarantor EBITDA and assets, and the EBITDA performance to budget was removed. There was also a reduction in the senior debt facilities by $24 million, which resulted in the total senior debt facilities of $285 million.

On 21 December 2018, the board of RFG announced that its lenders agreed to waive testing of the financial covenants, under the senior debt facilities of the company with respect to the period which ended on 31 December 2018. The company also highlighted that the financial covenants was supposed to be tested in the period ending 31 March 2019.

As per the company’s recent announcement, Franchise sector of Australia was under scrutiny after an enquiry by the parliament.

On 28 February 2019, the company announced its half-yearly results, where it noted statutory net loss after tax during the period at $111.1 million. The loss was driven by several factors which included its ongoing retail trading conditions, the cumulative impact of outlet closures etc. During the period there was restructuring activity which involved investment and the prevailing negative sentiments, with respect to the franchise followed by the decline in the new store, resale and renewal activity.

In the previous six months, the stock has generated a negative return of 49.47%. However, in the last five days, the stock has generated a return of 45.45%. By the end of the trading session, on 29 March 2019, the closing price of the shares of Retail Food Group Limited was A$0.255, up by 6.25% as compared to the previous trading day’s closing price. The company has a market capitalization of A$43.86 million and approximately 182.75 million outstanding shares.


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