EBRD to Give Croatia 660 Million Euros in Loans for Highway Debts

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The model for privatization of Croatia’s motorways should be known in 2017

The talks held between Croatian Prime Minister Tihomir Orešković and his German counterpart Angela Merkel could result in a favourable loan which might be issued as early as next week. It would be used to service HAC and ARZ loans in the amount of at least 660 million euros that are maturing in 2016, reports Večernji List on March 6, 2016.

European Bank for Reconstruction and Development (EBRD) will approve the credit line with the interest rate of less than two percent, according to sources. The government indicated that more information about these “definitely positive steps for Croatia” should be available next week. Meanwhile, the investor circles point out that this agreement is just another move that will allow the authorities some breathing space at the time when HAC has to deal with 560 million euros in interest and principal repayments this year while ARZ has to repay 93 million euros. Both companies are facing problems and they need the state to guarantee any funding.

With the green light from Germany, European Commission will look away and, as sources claim, it will not treat the loan as a non-permitted state support. However, this outcome is possible only if the government reassures the Commission that it has a plan for the permanent restructuring or privatization of the country’s highway system. If this were to happen, the World Bank could enter the loan reprogramming game again. The Bank is willing to reprogram 1.2 billion euros.

The government still does not have the final model for privatization. The likeliest one that is being mentioned in the investor circles is selling off a part of the HAC-ONC shares. The new owners would be retirement funds and citizens. The possibility to go back to monetization has not been ruled out either, which would include concessions for all the motorway sections except the highway between Zagreb and Split. There are also various combinations involving both options. No matter which model wins, companies managing the highways will have to restructure their debts.

The World Bank stands ready to participate in the debt reprogramming under an exceptionally favourable interest rate and even without privatization, but it will not give the money without serious proposals. It is asking for a clear restructuring plan for the companies managing Croatia’s highways and expects employee-related expenses to be cut and transport-related revenues to be increased.

The government will have several months to come up with the decision. The agreed loan will buy it another year to make a decision while consulting with the trade unions and the public.


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