Banks to Take Over Agrokor’s Debts to Suppliers?

Total Croatia News

New developments in the Agrokor case.

Agrokor’s suppliers and creditors should reach an agreement by the end of the week to freeze the payment of obligations under bills of exchange, a consultancy which will carry out the restructuring process of Agrokor should be chosen, a call for claims registration will be issued, and talks with Russian banks on further lending will continue, reports Večernji List on April 19, 2017.

The process is moving in a positive direction. Last week, Croatian banks injected money into the system, and after the Easter break optimism has returned to the stock exchanges, with Agrokor’s bonds and shares increasing in value.

The process has started, but it is hard to tell whether there is really room for optimism. Many lawyers see legal shortcomings which could result in lawsuits. For example, the choice of Agrokor’s companies which guarantee the latest loan worth 80 million euros. Among them is Vupik in which Agrokor has just a seven percent share. No one asked other shareholders whether they agreed with giving guarantees.

Another problem is that no one knows which parts of the company were used as loan guarantees more than once. But it is clear that has occurred. Also, through repurchase agreements, Agrokor is losing shares in some companies, such as Vupik and Agrolaguna. And, some of the companies which were used as a guarantee for previous loans seem to be sold in the meantime. However, resolving all these issued has been delayed and the company is now focused on normalization of its business operations. It is important that the whole group functions because of the role of Agrokor and its suppliers in the Croatian economy.

By the end of the week, stakeholders should agree to freeze obligations under recourse bills of exchange. The current proposed deadline is 31 May, but the goal is to extend the moratorium until the end of the process that will be led in Agrokor by the government-appointed commissioner, which is 15 months. After this period, financial institutions should collect the money from Agrokor itself. These obligations are in fact Agrokor’s debt, but since banks could not get their money from the company, the debt has been transferred to suppliers. It remains to be seen whether financial institutions will be willing to wait. According to unofficial reports, the debts under recourse bills of exchange amount to about five billion kuna.

Supplies and creditors will certainly have to agree to a debt write off. The discussions have not yet started, but that will be on the agenda when the process of restructuring begins.

Commissioner Ante Ramljak and temporarily creditor council will have to consider an offer they should receive from Sberbank for further funding of Agrokor. Its condition was that the loan of 100 million euros, which was given to Agrokor about a month ago, should be returned first. But that demand is almost impossible to be accepted because at the time the “Lex Agrokor” was not active. That might mean that Agrokor will have to look for another creditor. Some of western funds are reportedly ready to invest, but apparently their conditions are quite strict.

By the end of the week, we should know the name of the consultancy which will work on the restructuring process. Companies Alix Partners, EY, KPMG, Roland Berger, McKinsey and BCG are candidates. These are all strong global names, but McKinsey is considered by many to be the favourite because it has already worked on certain projects in Agrokor.

Financial injections given to Agrokor have encouraged investors, and on Tuesday there was an increase in the price of Agrokor’s bonds, while shares of the group increased in value by about 20 percent.


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