S&P Downgrades Agrokor’s Credit Rating Once Again

Total Croatia News

Despite the government’s efforts, credit rating agencies are not optimistic about Croatia’s largest privately-owned company.

Standard&Poor’s (S&P) credit rating agency downgraded Agrokor’s credit rating from CC/negative/C to SD/–/SD, due to the fact that on May the 1st, the company did not pay a coupon on its 300 million euro bonds which mature in 2019, reports Večernji List on May 9, 2017.

The credit rating agency stated that on 6 April Croatia adopted the Law on Procedure of Extraordinary Administration in Companies of Systematic Importance for Croatia, which limits Agrokor’s payment of interest or principal on its debts over the next 12 months. It also points out that, according to a standstill agreement signed by Agrokor with the largest creditors, repayment of bank debts is currently frozen.

“According to our criteria, we believe that all of the above is equal to a bankruptcy, because we do not expect that Agrokor will be able to settle its debts within a 30-day grace period,” says S&P in its statement.

Concerning the 300 million dollars worth of bonds that are due in 2020 and 325 million euro bonds with maturity in 2020, the agency notes that the non-payment of debt of more than 20 million euros represents a non-fulfillment of Agrokor’s financial obligations. It adds that, given the new law adopted in Croatia, it does not expect that the group will be able to make payments based on these bonds in the next 12 months.

S&P explains further that Agrokor’s rating has been downgraded to “SD” instead of “D” because Mercator in Slovenia (whose assets are separate from the group’s assets) continues to meet its financial obligations.

The agency, which on 5 April already downgraded Agrokor’s rating to “CC”, explains that the current “SD” rating will remain in effect until after the financial obligations of the company are restructured. The “SD” rating indicates the impossibility of settling debts in some areas, and is one step further into the non-investment levels. S&P now has Agrokor’s rating even lower than Moody’s, another well-known credit rating agency.

Moody’s downgraded Agrokor’s credit rating by one notch on 11 April, from Caa1 to Caa2, and raised the likelihood of its bankruptcy from Caa1-PD to CA-PD, with negative outlook.


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