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Why Retail Food Group Limited shares jumped 13% higher today

The Retail Food Group Limited (ASX: RFG) share price recovery has continued during morning trade on Wednesday.

At the time of writing the embattled food and beverage company’s shares are up 13% to $2.61.

What happened?

As well as potential short covering driving its shares higher, there was news out of the company this morning which could be the catalyst for today’s gain.

According to this morning’s announcement, Retail Food has successfully completed negotiations to extend its three-year $150 million debt facilities that were due to mature in December 2018.

These new agreements mean the company has a $100 million debt facility maturing in January 2020 and a $50 million debt facility due to mature in December 2020.

These debt facilities are courtesy of National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

Further to this, Retail Food has reduced existing five-year debt facilities maturing in December 2020 by $25 million, bringing its total senior debt facilities to $319 million.

Should you invest?

While Retail Food’s shares do still look cheap and the confidence shown in its business by its lenders is a big positive, I wouldn’t be in a rush to invest.

I feel the negative media coverage will be hard for the company to shake off and could limit franchise sales and renewals, potentially leading to a drop in earnings.

This makes it a high risk investment in my opinion and not one I would want to take on today.

Instead of Retail Food, I think investors should consider these exciting shares with far more compelling risk/rewards.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Retail Food Group Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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