At the end of October this year, the Agrokor story drew quiet. Namely, the largest insolvency proceeding in the history of trade law in the Republic of Croatia, as well as the largest restructuring process in Croatia, finally came to an end.
As Marina Sunjerga/VL/Poslovni Dnevnik writes on the 12th of November, 2018, by endorsing the credibility of Agrokor’s creditor settlement in late October, the huge process to rescue Agrokor from the pits drew to a close. The rescue of this huge company was an incredibly intense process which has dominated both the economy and the media over the past two years, naturally finding itself among the ”nominees” for the economic event of 2018.
Over the space of more than eighteen months, agreements between Agrokor’s many creditors have been marked by many overtakings, new institutions, political pressure on members of the Government headed by Andrej Plenković, numerous affairs and messy public overthrows. Under the enormous pressure, the company had to manage to somehow continue to do business, which was, in many moments, extremely difficult.
However, thanks to Fabris Peruško, Agrokor’s government appointed extraordinary commissioner, and the trust of suppliers in the positive outcome of the whole story, the formerly ailing company has experienced increased profitability and stabilised business.
Most creditors will have to debts of about six billion kuna paid by shares in the ”new” Agrokor, more specifically the new corporation structure to which Agrokor’s assets will be transferred, which will be set up during the next few months of implementing all creditors’ arrangements.
Part of the supplier’s debt has been billed in cash, and some financial institutions secured part of those claims via refinancing through a roll-up arrangement of up to 1 billion euro. Agrokor, more specifically its sixteen largest companies, posted revenues of 16 billion kuna after the tourist season, with virtually 1.5 billion kuna of operating profit.
Fabris Peruško emphasised that the company was operating better than it was before, and recalled that the deal was agreed with the support of creditors who hold 80 percent of Agrokor’s total debts in their hands.
Widespread support for the creditors’ deal proposed by the extraordinary administration was the goal that began at a hearing held at the beginning of July this year. To recall, the shares were divided so that the Russian banks Sberbank and VITB held a share of 46.7 percent of Agrokor. The issue of the shareholders’ position has still not been resolved, with a settlement reserving 25 percent of the stake in Agrokor, but issues around those assets can only come to trial if they manage to actually prove that their claims that are still being challenged.
Domestic banks received about 12 percent of the company, and the suppliers paid part of the debts with a five percent stake in the new corporate structure. However, thanks to their representatives, Marica Vidaković from Kraš and Marin Pucar from Podravka, they won high-quality positions to continue with their business.
As part of the settlement, there is a guaranteed placement of goods to all of Agrokor’s retail chain stores for the next five years, including Konzum, Konzum BIH, Mercator, and Idea. Additionally, if Konzum is operating with operating profits of ess than 40 million over the next four years, it will pay another 75 million euros in cash for the marginal debt.
The implementation of Agrokor’s creditor settlement has taken over 100,000 steps, with a workforce of 500 people. It is now necessary to prepare the company for the entry of its new owners, which means that the new corporate structure and new companies will have to transfer over all of their assets, certificates, concessions, labour contracts, brands, and the list goes on,
However, the most demanding business currently in the hands of Agrokor’s extraordinary management team is the refinancing of the much-talked-about roll-up loans.
Namely, by the end of December, this one-billion-euro arrangement will come with an eight percent interest rate, but in January, that will jump up to ten percent, and Agrokor will the be required to pay a one-time fee of 75 million kuna to its numerous creditors. By September 2019, that interest would have jumped up to 14 percent. The extraordinary management team hope to refinance the loan by the end of the year.
The various challenges ahead of Agrokor have remain high, since only when the new owners take over the company, set their own people and determine the business strategy, will it be realistically possible to estimate in which way Agrokor’s business will affect the domestic economy.
However, regardless of the future of Agrokor, the rescue of the huge company can finally be hailed to have been a successful process which has saved the Croatian economy. With this long and arduous process, a devastating domino effect was avoided, panic was stopped, and the food industry was stabilised.
The fact that most of Agrokor’s suppliers recorded a successful business year shows that large companies operating under the Agrokor Group’s umbrella have taken the opportunity to consolidate and adapt to new market circumstances. After its long and painful restructuring process, Agrokor remains one of the strongest and most important companies in the domestic economy.
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