Krispy Kreme Australia value plummets as it attempts to cut debt

A day after it emerged that the global Krispy Kreme group was trying to turnaround its flagging sales by entering the soft-serve ice cream market, an investor in Krispy Kreme Australia (KKA) has written the value of its 24% stake down to zero.

A day after it emerged that the global Krispy Kreme group was trying to turnaround its flagging sales by entering the soft-serve ice cream market, an investor in Krispy Kreme Australia (KKA) has written the value of its 24% stake down to zero.

Souls Private Equity released its preliminary final report yesterday, confirming KKA is attempting to restructure and extend its debt facilities. Souls said it would not be investing further in KKA and wrote the value of its equity and loan investment from $18.8 million to zero.

Souls revealed KKA’s revenue had increased from $48.9 million to $54.7 million in 2007-08, with earnings before interest, tax, depreciation and ammortisation rising from $1.7 million to $3.1 million. However, the growth was driven by new store openings and KKA entering the Queensland market.

But KKA chief executive and major shareholder John McGuigan told Business Spectator that he remains confident in the business and says the company’s 55 stores have traded ahead of expectations in the past few months. 

He confirmed KKA is in the process of raising funds to pay down debt. “We are trying to reduce third party bank debt and we are raising some money to achieve that. It’s not terribly complicated. It’s pretty much complete.”

McGuigan and John Atkinson, former colleagues at law firm Baker & McKenzie, own 38% of KKA through their boutique investment bank Hunter Bay Group. Other investors include RAMS Home Loans founder John Kinghorn and David Coe, founder of troubled financial services group Allco.