Better days coming for the Croatian textile industry?
Varteks from Varaždin is expected to undergo recapitalisation in the next month and a half. The company announced that the shareholders’ assembly would take place on 17 August, and one of the proposals for the shareholders is to increase the share capital, reports Poslovni.hr on 11 July 2017.
The new funds are expected to be provided by the British investment company Valtegra LLP. It is a kind of venture capital fund specialising in international investments in disadvantaged companies. In line with the readiness to accept higher risks, such funds generally expect higher potential returns.
According to the conditions set out in the proposal, Valtegra would invest 37.2 million kuna or around 5 million euros, and the British fund would ultimately become the owner of 48.6 percent of the company’s shares.
Varteks entered into a pre-bankruptcy settlement in 2013, on the basis of a five-year operational and financial restructuring plan, and this recapitalization is of great importance for its business operations. “With the recapitalization, we would receive operational capital sufficient to complete all restructuring projects and implement all planned development projects. This would fully stabilise our business operations and ensure the preconditions for sustainable growth and business development,” said CEO of Varteks Zoran Košćec.
The company’s management emphasises that, with the successful implementation of the recapitalization, all key indices would be improved, which would “create the necessary benefits for the continuation of business operations and organic growth and the acquisition of new markets.” By contrast, “postponing the start of the restructuring process would have an adverse effect on the company’s stability and competitiveness in the domestic and foreign markets, and consequently on creating additional value for shareholders.”
Like many other businesses that have entered the pre-bankruptcy settlement process, the restructuring process in Varteks is not proceeding smoothly. Varteks Group reduced its long-term liabilities from 147 to 122 million kunas last year, but at the same time increased its short-term debts by roughly the same amount (from 81 to 107 million kunas). Operating income declined compared to the year before (by 16 percent), The Varteks Group last year recorded a loss of 15.5 million kunas, while the year before it was 9 million kunas.
The financial result clearly reflects the still high burden of financial obligations, which makes the search for fresh capital understandable. Investors such as the British company Valtegra obviously have free capital and seek opportunities for higher risk investments.
Valtegra describes itself as a “rescue fund.” It focuses on rescue, stabilisation and business growth, and emphasises speed and accelerated transactions as an essential feature. Typically for such companies, they talk about their mission in a different language than conventional investors. “We do not read financial reports passively; we get to work. We invest when others turn away. We are passionate about rescuing companies and work tirelessly on their operational excellence.”
They will soon have an opportunity to prove that at Varteks.
