Croatia’s Agrokor reaches agreement with creditors

Croatia’s Agrokor reaches agreement with creditors
By bne IntelliNews April 2, 2017

Financially struggling Croatian retailer and food company Agrokor and member banks of the coordinating committee of financial creditors have in principle agreed on key elements of a standstill agreement, Erste Bank said on March 31, according to press reports.

Agrokor has expanded rapidly in recent years and accumulated high debts. Now the largest private company in Croatia, employing around 60,000 people in the region, is under pressure to pay its debts.

The standstill agreement should facilitate the company's efforts to address the issue of liquidity, ensuring the continuation of operations, protecting the company's value and presenting the basis for its sustainable restructuring, Erste said in a statement, according to Hina news agency. Erste is one of Agrokor’s creditors. 

The coordinating committee of financial creditors include Erste Bank, Privredna Banka Zagreb, Raiffeisenbank Austria, Sberbank, VTB Bank and Zagrebacka Banka.

Additional capital will be injected into the company in the coming days and it will be actively restructured, which includes a change of its management, Hina said. The value of the capital injection has not been revealed yet.

A chief restructuring officer post will be created at Agrokor and the new member of the management team will deal with the implementation of the stabilisation programme. During the restructuring process the top management posts will be filled by independent experts to conduct a transparent and sustainable process of restructuring.

The CEO of Sberbank Croatia, Mario Henjak, said that the creditors "have a clear plan about steps to be made in the coming days - from agreement with Agrokor's existing owners and management and change of the management to the injection of additional capital in the company and its active restructuring," Hina reported.

"As for the restructuring plan, [the company] will get a new management. We still don't know specific names, we will be choosing them together," Henjak said. He added that the standstill takes effect immediately.

The agreement was reached the same day the Croatian government sent a bill aimed at protecting the Croatian economy from corporate failure to the parliament. The Prime Minister Andrej Plenkovic says the bill has not been drafted for Agrokor, but the company could benefit from it. 

The bill envisages caretaker management for companies of systemic importance that are experiencing difficulties. The aim of the bill is to ensure and strengthen the financial stability of Croatia’s economy. The law which is being drafted will apply to companies with more than 5,000 employees and with debts exceeding €1bn.

Agrokor was downgraded by Moody's Investors Service on March 28. Its corporate family rating (CFR) has moved to Caa1 from B3 and its probability of default rating (PDR) to Caa1-PD from B3-PD. Moody's has also downgraded the senior unsecured rating assigned to the notes issued by Agrokor and due in 2019 and 2020 to Caa1 from B3. The outlook on the company's ratings remains negative. 


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