Local banks have rejected Sberbank’s proposal.
The headquarters of Sberbank in Moscow has sent a letter to Croatian banks and other potential creditors of Agrokor inviting them to withdraw from the financial arrangement that would allow Agrokor to receive 480 million euros worth of loans via the roll-up model, reports Večernji List on 30 June 2017.
The letter was sent on 26 June, and creditors of Agrokor were given a three-day deadline to send their replies to the Russian bank. Sberbank refers to “Lex Agrokor” and its Article 40, in which there is no mention of the roll-up model. Therefore, the bank pointed out that such a way of financing was illegal and said to the investors that they should study potential legal obligations that might result from participating in such an arrangement.
It is very likely that Sberbank will not finance Agrokor in the future, just like the smaller VTB bank, which is also owned by the Russian state. These two banks are exposed with about 1.5 billion euros in Agrokor and have so far been the largest creditors to the group.
The roll-up model, which gives priority repayment status for 480 million euros of old loans in return for 480 million euros of new debt, which will also have the priority status, will help new lenders improve their position among other creditors. The Russians are therefore angry because investors who have bought bonds at 30 percent of their value will now have recognised 100 percent of the value of the bonds. In other words, investors paid 30 million euros for bonds which are worth 100 million euros. Now, with a new 100 million euros worth of investment, they will get the status of a creditor with a total of 200 million euros, although they have invested just 130 million euros.
Agrokor’s government-appointed commissioner has repeatedly invited the Russian banks to participate in the new loan, but they have refused. He is still ready to talk to the Russians, but will not wait much longer. It is likely that part of the new loan will be provided by American fund Knighthead Capital Management, which bought Agrokor’s bonds in the first quarter of 2017.
Croatian banks and investors have reportedly received from the Commercial Court in Zagreb the confirmation that the roll-up model is not illegal and that it is in accordance with the Lex Agrokor. That is why Croatian banks will not accept Sberbank’s request for a boycott of Agrokor’s financing but intend to use the 160 million euros quota given to them in the new arrangement. The money will be provided by Erste Bank, Privredna Banka Zagreb, as well as several smaller banks in Croatia.
The Russian message is that all other means have been exhausted and that they will probably look for other ways for collecting their claims. The fact that the letter to the banks was sent straight from the Moscow headquarters proves that the bank top leadership is now involved and that they are not going to allow the bank to lose its 1.5 billion euros.
Only when all the claims are summed up in late August will we know Agrokor’s total debt. Then the permanent council of creditors will be established, but the Russians will have just one-fifth of the total number of votes there.
