Home / Business and Politics / The Boycott of Konzum and Jamnica Increases Fortenova’s Risk of Their Sale

The Boycott of Konzum and Jamnica Increases Fortenova’s Risk of Their Sale

Consumers who participated in a survey on the Facebook profile ‘Hello, Inspector’ regarding which retail chain should be boycotted from Saturday, February 8, to Friday, February 14, did not reward last week’s move Konzum which, in collaboration with Croatian suppliers, invested one million kuna in reducing and locking prices of 250 domestic products. On the contrary, the majority, 31.7 percent of the recorded 144,732 voters in the survey, expressed support for the one-week boycott of Konzum.

As Konzum is the largest domestic retail chain, with a market share slightly above 20 percent, it can be assumed that even without this one-week boycott, it is already the largest (or one of the largest) losers of the general boycott of stores that has been ongoing for the third consecutive Friday. Just for this reason, it is clear that the series of boycotts organized by ‘Hello, Inspector’ has most affected the business entity Fortenova Group, to which should be added the recently concluded one-week boycott of carbonated drinks and bottled water. It is not known how ‘successful’ this boycott was, but Jamnica has certainly been affected by it, more or less. It is also unlikely that the sales of Zvijezda and PIK products remained unscathed due to the boycott of all stores on Fridays. All of this will reflect on the liquidity decline of the entire Group.

Fortenova, which is already dancing on the edge of its ability to meet the conditions imposed by the American fund HPS Investment Partners three months ago regarding the refinancing of a debt of 1.22 billion euros, unexpectedly found itself on very slippery ice just when it seemed it would be able to meet all creditor conditions. Last week, the transaction for the sale of the agricultural business to Podravka was successfully completed, and 330 million euros were credited to Fortenova’s account, which, despite certain uncertainties about whether the approvals from all market regulators would arrive on time, was executed according to the planned dynamics.

Since 300 million euros of that amount was pre-planned for partial debt repayment by the end of March this year, one of the essential conditions from the new financing agreement from last November has been resolved. At the same time, the second condition would also be resolved, which is that the debt to EBITDA ratio, which was slightly below 4 times in Fortenova in November, must not exceed 4:1 by the end of March.

As confirmed by Fortenova, if after March 31 of this year the debt to EBITDA ratio is equal to or greater than 2.8:1, Fortenova must begin the process of selling its retail or beverage divisions. In other words, in that case, a new owner will be sought for Konzum and Mercator or for Jamnica.

If Fortenova fails to meet these conditions due to the consumer boycott, a risk that no one had in mind three months ago, will HPS be understanding and revise the lending conditions? I highly doubt it. Especially since a month after Fortenova arranged new financing with HPS, that fund was taken over by the American financial giant BlackRock. No one has become the largest asset manager in the world because they were understanding towards their debtors.