Bogotá — Colombian discount chain Justo & Bueno will receive close to $628 million from JF Capital, which the fund manager expects to inject on May 10, enabling the retailer not only to meet its commitments to creditors in Colombia but also to begin an expansion process into Mexico, Ecuador and Argentina during the first stage of investment.
From the request to enter the restructuring process, to the last-minute withdrawal of a key investor last year, Justo & Bueno has faced an uphill struggle to stay afloat in Colombia, where the so-called ‘hard discount’ chains accounted for 32% of retail sales in 2020.
On April 28, employees and former employees of the discount chain aired their concerns regarding their precarious situation amid Justo & Bueno’s ongoing restructuring process during a hearing by Colombia’s corporate watchdog regarding the reasons behind the company’s failure to meet its debt and payroll obligations.
At the hearing it was learned that the company, acquired by Joining Futures Capital International Limited, has a cash deficit of 135 billion pesos ($33.6 million) as of April 30, 2022, for expenses covering its administrative restructuring.
Listen (in Spanish) to JF Capital’s investment in the company:
After the more than five-hour hearing, the presiding judge decreed a recess until the morning of Monday, May 2, to continue the hearing and make a decision.
Amid the tension within the company due to the claims of creditors of alleged breaches of its obligations, Jhony Zhang, director and vice-president of JF Capital, an investment firm with offices in Hong Kong, reveals exclusive details to Bloomberg Línea of how the retail chain will be able to survive its current crisis.
Bloomberg Línea: Why has JF Capital International Limited decided to invest in Justo & Bueno despite the company’s crisis, and what opportunities do you see in the company, and particularly in Colombia?
Jhony Zhang: JF Capital International Limited, formerly JF Capital, is a platform that since 1990 has been promoting, inviting, intermediating and placing equity fund investments around the world in companies with a social and international focus, Justo & Bueno being an excellent candidate. We seek opportunities and place assets from capital funds and investors from Asia, Europe and Arab countries, who trust in our alliance for the development of investment projects focused on the global goals of sustainable development. For this transaction we achieved the participation of three funds, two of Asian origin and one of European origin, whose names I cannot disclose due to banking secrecy, but will be confirmed to any governmental entity or financial institution that requests it in writing and with the required justification for disclosure.
When the World Ecumenical Ecclesiastical Conference (CEEM) introduced us to Justo & Bueno and we learned of its exponential social impact in Colombia, Panama and Chile, we proceeded to make a thorough study and to embark on its rescue with the three investment funds that are supporting us in this process. One of the things we do best at JF Capital International Limited is to support companies that face challenges related to the economic environment or an extraordinary situation. In addition to this, we are going to strengthen Justo & Bueno so that it continues to improve access and bring well-being to families throughout Latin America.
Another aspect that motivated the purchase is that [current CEO] Michel Olmi and his team have implemented since 2009 a ‘hard discount’ format with a significant impact on keeping the basic food basket at accessible prices, and our investment plan with the funds that currently support us for this project is to replicate this idea that has already been successful before the pandemic, and take it to every corner of Latin America.
Are you going to maintain the prices, the name and the brand after the restructuring process is completed? If not, what will it be called?
We will keep the prices, the name, the concept and we will further increase the benefits for customers and users by injecting new capital over time.
How much is the capital injection that the fund will make in Justo & Bueno, and what figure will be used to manage these resources? Was there any talk of creating a trust in a Colombian bank?
Yes, the bank has already agreed to help us in the process and will carry out due diligence on our authenticity and capacity to move this project forward.
JF Capital International Limited is promoting and will place 500 million GBP (about $628 million) to be able to continue this business in Colombia, and expand it to other Latin American countries. We will invest the necessary money to strengthen the Justo & Bueno model in the region.
On March 29, we signed a commitment to invest in Justo & Bueno. When investing in a company in insolvency proceedings anywhere in the world, it normally takes us between 90 and 120 days to complete the placement of resources, depending on the policies of each country. We hope to have the help of the Colombian government and the national banking entities so that this process does not take the usual time, and in an extraordinary way we can place the money of our funds before May 10.
What is the company’s investment plan after this capital injection, how will you grow the business and what is the branch expansion plan?
JF Capital International Limited together with its international commodity conglomerates and its Chinese technology partners will help us to ensure more modern stores and more agile distribution channels that will allow us to achieve rapid expansion into countries such as Mexico, Ecuador and Argentina during this first stage of investment.
What is the company’s payment plan in the country to stay current with its creditors?
As was officially sent by letter to the local bank that agreed to work with us, we will handle the payments through the establishment of a trust for payments. Once the resources have been delivered and monetized in Colombia, the trust will handle the respective reviews and payments to creditors, employees, leasers and suppliers.
Regarding the previous debts, these are part of the corporate restructuring process and, although due process will be executed with the endorsement of the Superintendency of Companies, we expect to pay these debts as soon as possible.
The purchase of Justo & Bueno is a gateway for more investments in the retail segment in Colombia. Do you plan to make more acquisitions in the country or in Latin America?
Our allied funds are always looking for new investments and that is why we decided to bet on Justo & Bueno. For now our objective is to strengthen and grow this company to maximize its social impact.
Will Justo & Bueno’s management in Colombia change with the arrival of a new CEO?
The management of the organization will continue with the same team that has been at the helm since the company started operations in 2016. This is one of the aspects that gives us the most confidence in the strengthening and exponential growth in Latin America.
Does the company plan to add Chinese product suppliers to the Colombian chain? Is it possible to import products from that market? And in which segments?
This is not a priority. The priority is local suppliers who, in addition to having been born alongside the chain, have been essential in its reactivation process. There are about 450 companies, mostly small, that strengthen the business and social fabric of Colombia and the countries where Justo & Bueno is present.
Does JF Capital International Limited also have Colombian capital?
First I want to clarify that we are not a Chinese fund. We are a capital placement company with offices in Hong Kong, in this case managing two Asian funds and a European fund. We are one of their most important underwriters, we look for different investment opportunities in the world, we propose them, they extend us their credits with diverse top 110 banks for us to channel them directly to the companies or governments that are economically affected. There is only one Colombian investor of great economic capacity and prestige considering this investment, and whom we have investigated and completed the due diligence. We are awaiting their confirmation to join the process.