Retail Food Group Limited may sell assets as bankers circle

The Australian newspaper’s data room column is reporting that Retail Food Group Limited (ASX: RFG) has hired investment bankers at UBS to advise it on potential asset sales that could go some way to solving the group’s debt problems.

On June 29 RFG reported to the market that its lenders that include some of Australia’s major banks had agreed to waive “testing of its debt covenants” for the period ending June 30 2017, with the inference being that the debt covenants would have been breached if tested.

It’s the group’s debt problems that have sent the shares 90% lower since December 2017 as shareholders worry that the banks may force the group into a fire sale of assets, or some kind of debt-for-equity swap with private equity or distressed debt operators that would see the banks get at least a small part of what’s owing to them back.

It’s still possible that Retail Food Group survives its emergency situation as it’s still profitable on an underlying basis and its new CEO is reportedly working overtime travelling the country to get the franchising business back on an even keel.

The coffee roasting business also remains reasonably strong, while an asset sale like that of Hudson Pacific could also help aid a recovery. As such anyone brave enough to buy shares today could make a motza or lose their entire investment.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Scott Phillips.

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