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Freedom Foods (ASX:FNP) share price crashes 94% after 9-month suspension

Freedom foods cereal share price

After nine months in suspension, the Freedom Foods Group Ltd (ASX: FNP) share price has returned to trade on Monday morning.

In early trade, the diversified food company’s shares were down a massive 94% to 18 cents.

The Freedom Foods share price has recovered a touch since then but is still down 91% to 28 cents at the time of writing.

Why was the Freedom Foods share price suspended for nine months?

Freedom Foods requested its suspension last year amid a series of significant accounting issues that led to the sudden exit of its CEO and CFO.

These issues ultimately led to the company having to revise and restate previous financial statements, culminating in a loss after tax of $174.5 million for FY 2020.

Freedom Foods share price returns

This morning the Freedom Foods share price is trading again after finalising its recapitalisation plans.

The company is raising up to $265 million via the issuance of unlisted, subordinated secured convertible notes. It has also restructured its existing senior debt facilities with HSBC and National Australia Bank Ltd (ASX: NAB).

The company’s capital raising will comprise an invitation to eligible investors to participate in a wholesale investor offer of up to $130 million of notes and a placement of up to $200 million of notes to its largest shareholder Arrovest.

Arrovest will scale back its investment to a minimum of $135 million depending on the level of participation under the wholesale investor offer.

These funds are being raised at $1.00 per note. After which, these notes will convert into shares calculated by dividing the outstanding face value of the notes (including accrued interest) by a notional share price of $0.70.

Subject to shareholder approvals, these notes can convert into shares at any time at a Noteholder’s election. However, notes will be mandatorily converted where 75% or more of Noteholders have elected to convert.

What will it do with the proceeds?

The proceeds will be used repay between $183 million to $233 million of the company’s existing debt. This is consistent with the requirements of the company’s senior lenders.

The funds will also provide a more flexible capital structure that management believes will better facilitate the ongoing financial and operational turnaround of the company.

And finally, the proceeds will provide incremental capital to support the company’s turnaround strategy.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freedom Foods Group Limited. 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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