Michel Olmi, architect of renowned businesses in Colombia, such as the big discount store chains D1 (2009), Tostao, Café & Pan (2014) and Justo & Bueno (2016) broke his silence again and agreed to respond to EL TIEMPO a written questionnaire, after the unsuccessful sale of HD Colombia SA, parent company of Mercadería, to the Chinese fund JF Capital International Ltd.
(Also read: Justo & Bueno stores began to reopen its doors to the public)
This fact put his organization in Colombia on the course of liquidation, as determined by the Superintendency of Companies on Thursday of this week, although the entity gave a waiting period of 30 days, at the direct request of a group of creditors, for them to present a final rescue plan for the company.
Olmi trusts that this alternative will work for the sake of preserving the company and safeguarding the interests of employees, suppliers and their families, even more so when it recognizes that Justo & Bueno “It does not have a significant base of fixed assets that support claims in a liquidation scenario.”
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The constant announcements that never materialized undermined the confidence of many in the company. What to say to that?
We do not stop working to find the best option for everyone. With our effort we found an investor who guaranteed the sustainability of the channel, but the deadlines were not met. We understand the position and the frustration that we all experience today.
Although we did not obtain the expected result, during the reactivation we found interest from multiple investors who validated our effort, but encountered barriers in closing the operation.
We received offers, but due to the delay in the entry of resources and the high risk perceived for this transaction, we were unable to meet the immediate needs. Unfortunately, ensuring investment within the framework of a reorganization process, with the political interests and risks of an election year within a key segment for the economy, is not an easy task.
(Also read: Junction begins between directors of Justo & Bueno and the settlement agent)
Despite garnishments on our bank accounts, unsuspected restriction on investor accounts, fears of existing investors and other difficulties, we made progress towards raising capital of a higher caliber. We believed that the sale of HD Colombia SA to JF Capital was the answer, but we do not understand why, despite their will and their different approaches to local authorities, the money could not be nationalized.
How much money was he talking about?
JF Capital International presented an offer in March, which not only covered this current balance before May 10, about 35 million dollars, but also assumed the operating expenses in the future, the estimated cost of the reorganization of the credits in Law 1116 and the stabilization of the firm for a new stage of growth.
They showed diligence and speed in advancing the transaction, I have no doubt of their genuine interest in helping to save the company and their abilities to materialize a regional expansion plan like the one they proposed. Unfortunately, I don’t know what could have happened.
(You may be interested in: Liquidation of Justo & Bueno: who demands it and who opposes it?)
But neither did the deadline for publicizing the structure of the business with said fund…
As JF Capital publicly mentioned in recent days, the signing of the agreement for the sale of HD Colombia SA, parent company of Merchandise, to JF Capital International Ltd. took place on March 29. In the agreement, the buyer assumed all the debts accumulated since January, a payment plan for the debts in reorganization and an ambitious expansion plan in other Latin American countries.
On May 2, the payment and capitalization plan of JF Capital for Merchandise was filed in the file of the Superintendence of Companies and, considering the ample and sufficient information, they did not send us additional information.
On May 2, the payment and capitalization plan of JF Capital for Merchandise was filed in the file of the Superintendency of Companies.
How do you respond to those who say that what you have done is buy time to take resources out of the country?
That is false. Since 2009 we have managed to attract investments to Colombia that exceed 500 million dollars for brands such as D1, Tostao and Justo & Bueno. Mercadería is a company with institutional investors, who are governed by strict terms of compliance and corporate governance. Since its inception, the company has been audited by KPMG and our activities have been transparent and scrutinized by global investors.
Such an accusation involves a lot of people with unblemished reputations. If my interest had been to take resources out of the country, you can be sure that I would not have invested all my capital in new ventures in Colombia. Much less expose the founding group that has accompanied me since 2009.
(Also: What does the judicial liquidation order for Justo & Bueno imply?)
I have already lost everything trying to get this project off the ground, but I am willing to start over to continue contributing to improving people’s quality of life and serving the purpose we have built of guaranteeing well-being and accessibility for all families, without distinction of origin, creed, color or socioeconomic status.
He is also accused of making millionaire payments to suppliers close to his organization…
Mercadería is a company audited by one of the largest management and accounting auditing firms in the world. Financial management, compliance policy and operational transparency are our main differentiators. Whoever infers preferences in payments to related companies or other actors in the process is not telling the truth. We did not even use these funds to privilege our most fragile collaborators, who clearly suffer from the recent delays in the payment of salaries.
Why do you request the liquidation of the company?
Taking Justo & Bueno to a liquidation was the last resort. Our purpose since the beginning of the crisis has always been to save them, the jobs and the allies who have been part of this great dream, but because the resources did not come in, we had no alternative.
We act responsibly and in duty to all the families of collaborators and allies who had placed their hope in the fulfillment of JF Capital’s commitment. The Supersociedades allowed a last rescue option and we hope that in the next 30 days a formula will be achieved that allows the continuity of the company, because we know that the country requires this distribution channel.
And in a liquidation scenario, how will these families and creditors be responded to?
The value of Justo & Bueno lies in the positioning we have built over these years and its contribution to both the quality of life of Colombian households and food security through the network of stores in more than 300 municipalities in the country. The business model is based on an operation scheme without its own assets, combining leases and leasing to facilitate growth in the initial phase. Once the accumulation phase is entered, the model allows moving to the construction of a portfolio of fixed assets that consolidate the company’s equity situation.
Justo & Bueno did not get close to this second stage and therefore does not have a significant base of fixed assets to support claims in a liquidation scenario. The greatest value of the chain is in its execution capacity. That is why the best scenario will be to keep the channel running.
The Chinese fund JF Capital
So what to say to the workers, landlords and suppliers who are victims of this crisis?
What I say is little because those affected have been many. We deeply regret the situation that the collaborators, the owners of the premises, the suppliers, who were our investors and all those who believed in us, are going through. We trust in the light of hope that the judge lit for the rescue of Justo & Bueno. From the beginning we acted with the greatest responsibility trying to avoid the worst scenario and knowing that the only way out was to keep the operation active. We exhausted all possibilities to save Merchandise.
Where did the JF Capital option come from?
As of the signing of the agreement, JF Capital began efforts to ensure the allocation of strategic funds for the operation, given that it is not a traditional equity fund, but rather an underwriter of funds from multiple issuers of high investment grade worldwide. .
Despite not being a well-known firm, it manages a global investment portfolio in high-impact segments, mainly in land management, investments related to commodities, retail technology and supply networks. They approached us through the church, and they had the endorsement of the World Federation of UNESCO Associations and the World Ecumenical Episcopal Conference, which is why we feel supported and confident in expanding the conversation.
During the negotiation process I interacted with a highly professional group with global experience that inspired confidence in me. That is why I want to be emphatic in rejecting derogatory and discriminatory expressions towards them. Of all the offers received during this last stage, that of JF Capital not only had the largest redemption capital but added value for its investment portfolio and experience. We believed in them as allies and we regret that it has not materialized.
The causes of the decline of Merchandise
Fair & Good Merchandise was born in 2016 and, according to Michel Olmi, in 2020 it was the business with the fastest growth record in the hemisphere. In 4 years they reached 1,320 stores and sales of more than 874 million dollars annually, being the fastest growing discount chain in the world. The projections indicated reaching the break-even point in 2020, two years less than its competitor D1, but the pandemic crossed them.
Restrictions in 2020, store closures and the 2021 national strike limited access to capital and undermined the firm’s liquidity, affecting its ability to pay and the confidence of suppliers.
“The quarantine and closures led to shortages in most of our portfolio, a situation that translated into a drop of more than 94 percent in sales,” Olmi said.