The executive team at embattled franchisor Retail Food Group (RFG) were handed a Christmas lifeline by the company’s lenders after a difficult 12 months for the group.
In an announcement posted to the ASX, RFG revealed that its lenders had agreed to waive testing of the financial covenants for its loans for the period to December 31.
The lender’s decision follows previous waivers in June and September, as the group desperately attempts to address its crippling debt issues.
According to the arrangement, the covenants under the company’s senior debt facilities would be next tested on March 31, 2019, with the group reiterating its primary concern was reinvigorating its balance sheet.
“Notwithstanding the lenders’ agreement to provide a waiver with respect to testing of the covenants at 31 December 2018, the board remains focused on the company’s balance sheet position and continues to assess a range of alternatives to reduce balance sheet leverage, including potential asset sales,” the company said.
Late last year, Inside Franchise Business reported that RFG had flagged the sale of certain brands under its portfolio as a potential solution for the group’s debt worries.
“To reduce our bank borrowings, it is likely that we will need to sell assets, recapitalise the balance sheet and reduce our cost base by a large amount,” RFG chairman Peter George told shareholders at the group’s annual general meeting in November.
Any asset sale would fall under the obligations of an agreement between RFG and its senior debt lenders, detailed in an August announcement from the group.
The agreement outlined that 100 per cent of the net proceeds of any asset disposal (unless agreed) must be applied to the repayment of debt, with RFG forced to refinance its debts by October 2019.
The on-going recapitalisation efforts will be addressed in the new year with RFG announcing, a “further update will be provided to the market in due course”.
