Moody’s Again Downgrades Agrokor’s Credit Rating

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It seems that Moody’s is not too confident in government’s newly-appointed commissioner.

On Tuesday, Moody’s again downgraded Agrokor’s credit rating, which is the first move of one of the credit rating agencies after commissioner Ante Ramljak took office as the head of the troubled group. As reported on the Moody’s website, the rating has been lowered from Caa1 to Caa2. Prospects for further changes are negative, reports Jutarnji List on April 11, 2017.

“Our decision to downgrade Agrokor’s rating reflects the company’s application for restructuring under the new Croatian law (lex Agrokor), which to us means that bankruptcy is highly likely,” said vice president and senior analyst at Moody’s Vincent Gusdorf. “In our assessment, we have also taken into account the uncertainty surrounding the whole process of restructuring, given that the ability of creditors to get their money back depends on a number of factors which will be apparent only with the passage of time,” added Gusdorf.

Moody’s further notes that the decision to lower the credit rating comes after deterioration in Agrokor’s relations with suppliers, which greatly aggravated its liquidity. Cash which the Group has, according to the latest report published in September last year, was about 307 million euros, which is insufficient for even a partial repayment of debts which, also according to the September’s report, were around 16.1 billion kuna, according to Moody’s.

The prospects for recovery, according to the agency, will depend on a wide range of factors. Strained relations with suppliers could affect the shares of companies from the group that are traded on the stock exchange. Moody’s will monitor the upcoming changes in the capital structure, and the credit rating will be further reduced if future developments hint that it might be even less likely that creditors will get their money back.

Moody’s also notes that on 1 May one tranche of interest on a part of Agrokor’s debt will have to be paid. It points out that it will consider the company to have gone bankrupt if that tranche is not repaid. It is the interest on the bonds worth 300 million euros maturing in 2019.

Finally, Moody’s believes that currently there is nothing on the horizon to indicate any positive signal that would result in an increase in the credit rating of the group. In the future, changes might take place if Agrokor manages to solve the situation with its liquidity and improve its financial structure by reducing total debt.


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