How Agrokor Crisis Caused Earthquake in Government and Entire Croatian Economy

Lauren Simmonds

Updated on:

Agrokor has been the ”talk of the town” this year, but what exactly happened and how did we end up here?

As Index writes on the 5th of October, 2017, the crisis which shook Agrokor, otherwise the biggest player in the Croatian economy, has dominated the media for months and is certainly the most significant event of 2017 on the domestic economic and political scene. The hardly imaginable possibility of bankruptcy of the largest, most important private company in the Republic of Croatia threatened irreparable damage and the ultimate collapse of business for numerous small, medium and large companies and producers, not to mention the threat of job losses so huge it would be on an almost incomprehensible scale.

This crisis also rocked the Croatian government as the deep internal problems and suspicions in the face of the worrying situation saw the coalition between HDZ and the MOST collapse, and the new ruling coalition found itself on a much, much weaker foundation than at the very beginning of its mandate.

The roots of Agrokor’s enormous crisis have certainly been present for some time now, but as the group was closed to the public, the first signs of the problem appeared in the public eye only at the beginning of this year.

January the 2nd:

Moody’s (agency) lowered Agrokor’s rating of B2 to B3, and the likelihood of bankruptcy rose.

“We are of the opinion that Agrokor will probably not retain credit ratios in line with our previous B2 rating requirements in the light of the operational deterioration that occurred in the first nine months of 2016,” Moody’s explained. Despite this, Agrokor managed to maintain stable prospects owing to the overall expectation that Agrokor would stabilise its earnings over the following 12 months.

January the 16th:

Four companies from Agrokor – Jamnica, Zvijezda, Ledo and PIK Vrbovec – announced that they received 48.3 million euros in loans from the Croatian Bank for Reconstruction and Development to prepare for exports. Only on that day was the public made aware of these loan agreements approved by HBOR back in December of 2016.

January the 18th:

Agrokor cancelled a syndicated loan involving BNP Paribas, Credit Suisse, Goldman Sachs and JP Morgan. The public was informed about it only a week later, following numerous media reports that Agrokor’s bonds on the market had begun to lose their value.

January the 25th:

In connection with the syndicated loan, Agrokor stated that the company was stable and was fully able to respond to and deal with the numerous financial obligations that lay before it. In spite of these attempts to bring peace of mind, Agrokor’s attempt to calm the general public failed, and the concerning issue of both media and government speculation on the possibility of bankruptcy was now clearly on its way.

January the 26th:

Finance Minister Zdravko Marić said that he was familiar with the situation in Agrokor and that he did not believe all the talk about bankruptcy because it was still a good company, but “the fact that the credit rating fell short did bring with it certain repercussions”.

Prime Minister Andrej Plenković said that Agrokor was the largest Croatian company and was important for the economy. He said that he believed that the people who manage the company had taken into account all aspects of efficient, rational business operations and would find the appropriate methods and solutions to finance the company.

When asked whether or not the government was involved in finding a solution, Plenković said, “As Prime Minister, at this point I don’t think I need to add anything, and of course we’ll follow [matters] and strive to have a good insight into everything in regard to what the key Croatian companies are doing”.

As February rolled around, there was growing speculation about the possible takeover of Agrokor by the Russian banks and the intervention of the state, an analysis of the impact of the crisis on the entire economy was followed by a new crushing blow to Agrokor by Moody’s.

February the 10th:

Russian Ambassador to Croatia, Anwar Azimov, openly stated that Russia expected Agrokor to fulfill all of its obligations to the Russian banks. He also said that he was not considering granting a new loan to the company, but if it was asked for, then that would only be considered “within the context of the financial difficulties it faced.”

When asked by a journalist whether Sberbank was ready to take over part of Agrokor, Azimov replied that Russia “hadn’t claimed any part of Agrokor”.

On the very same day, Agrokor reacted by saying that it had intensive cooperation with all of its investors, including those from Russia.

February the 13th:

As media speculation gradually grew stronger about the crisis in Agrokor, Deputy Prime Minister Martina Dalić said that “a judgement on the state of the company and the company’s business should not be carried out at the level of media speculation”.

“The government expects Agrokor to have its management deal with all of its challenges properly and in a timely manner, that also includes this case,” Dalić stated.

But this did not calm the market, and the Crobex index fell further on the Zagreb Stock Exchange, mostly because of the falling stock prices of Agrokor-based companies – Jamnica, Ledo and Zvijezda, which fell between 5% and 11% on that day.

February the 15th:

Finance Minister Zdravko Marić stated that Agrokor was too big a company to manage to keep the state’s attention away from it.

“At this point we aren’t in any contact with Agrokor, meaning the management and the company itself hasn’t turned to us. We’re following the developments of the event taking place within the largest Croatian private company, which employs almost 40,000 people in Croatia. As would be the case in every other country, for every government, for the state, this is something that should be paid attention to.”

When asked by a journalist about the possible intervention of the state, Marić responded, “I’m sure that the management of the company will find ways to get out of this situation.”

He also pointed out that, if it did indeed become necessary for the government to get involved in the unfolding situation, he would be exempt from deciding upon anything to do with Agrokor, given the fact that he had once worked within the group.

On the same day, Moody’s announced a more detailed assessment of exactly why Agrokor was downgraded at the beginning of the year. The agency argued that, thanks to the refinancing carried out at the end of 2016, the group did not have any significant repayment of bonds or bank loans to pay by 2018. However, it stated that the cancellation of syndicated loan in January was negative, as Agrokor remained dependent upon a very limited number of Russian banks.

Moody’s pointed out that a clear plan to settle the payment of PIK loans (a specific financial instrument of borrowing money from the debtor and repayment at the end of the agreed period) had been taken up.

February the 24th:

In yet another concerning blow, Moody’s reduced the prospects for Agrokor’s rating from stable to negative.

Failure to refinance PIK loans could potentially lead to increased group debts either on March the 8th, 2018, or on June the 8th, 2018, when the PIK loans were due to be billed, which could lead to a change in control.

Furthermore, Moody’s believed that Agrokor’s obligations to high suppliers amounted to an eye-watering 16.2 billion kuna.

In March, there was a storm on the political scene following news of Prime Minister Plenković and Ivica Todorić’s meeting, while the price of Agrokor’s company shares fell sharply after suspicions within the Russian VTB bank about irregularities in Agrokor’s books surfaced.

March the 14th:

After a series of media headlines, the government announced that a meeting involving government representatives and Agrokor had been held:

“The government is monitoring the situation within Agrokor owing to its importance to the Croatian economy, and we’re aware of the lowering of Agrokor’s credit rating and we’ve repeatedly emphasised that this falls upon the responsibility of the owners and the management for the overall business of the company. We’re making the effort and considering various options to stabilise business. We want it to succeed and we’ll keep the situation on track. “

The meeting was attended by Agrokor’s boss and majority owner, Ivica Todorić, Agrokor’s finance boss Ivan Crnjac, Prime Minister Andrej Plenković, MOST’s Božo Petrov, Finance Minister Zdravko Marić and Deputy PM Martina Dalić.

March the 15th:

The news of the ”Agrokor meeting” triggered a series of reactions on the political scene. Petrov said that Ivica Todorić was responsible for the situation in Agrokor.

“The state won’t save Todorić, but it will defend the economic system and protect the interests of Croatia as needed, because Agrokor, according to the number of its companies and those doing business with it, is a strategic company within the Croatian economy.”

SDP President Davor Bernardić said “when Agrokor rocks, so does Croatia as a whole”. He added that SDP would support every good solution in the interest of over 40,000 people who work in Agrokor.

Reflecting on whether Zdravko Marić, an ex-employee of Agrokor, should be exempt from deciding on matters directly related to Agrokor, Bernardić said that Marić, as Finance Minister, was the first to be invited to participate in the process.

HNS President Ivan Vrdoljak stated that Marić should be excluded from the case:

“I think he must surely have to be excluded from this story, but with his knowledge and experience from working in Agrokor, it is necessary to provide information on what’s happening and how all this has come about.”

Prime Minister Plenković called for calm: “The meetings that took place a few weeks ago are no reason for any drama or any kind of disturbance.”

He reiterated the fact that the owner and the management were the ones primarily responsible for goings on within Agrokor and added: “What I’m interested in as the PM is making sure that everything that Agrokor has going on has no negative repercussions on the stability of the Croatian economy and the financial system.”

Finance Minister Marić also made a statement, given the speculation that Agrokor’s tax debt had now reached an incredibly worrying 6 billion kuna:

“As far as tax matters are concerned, there are no apparent forms of evidence that would indicate a state of emergency, that is to say, that they need to act quickly,” the Minister said.

When asked whether or not he was exempt from deciding on matters going on within Agrokor, Marić replied: “I will certainly be [involved in] certain elements and segments, but in this case, we’re talking about the issue of the whole economy and the government will take an adequate stand.”

March the 16th:

After a sharp reaction on the political scene and the considerable drop in the price of shares from Agrokor’s subsidiaries, the company announced that it, together with its partners, was analysing all possible options for stabilising the company’s operations, taking into account employees, suppliers, investors, consumers and other partners.

Bloomberg, meanwhile, announced that Agrokor was in talks with Russia’s Sberbank about 300 million euros in funding and that 100 million euros had already been secured.

March the 17th:

Agrokor reported that the company was paying 3 billion kuna in tax to the Croatian state, more than half of which goes on VAT.

The idea that Agrokor was 6 billion kuna in debt would mean that the company had paid no tax to the state for two years. Agrokor stated that it did not have any tax liabilities with respect to the Croatian state on that day.

March the 18th:

Bloomberg published a conversation with Sberbank’s Maksim Poletaev, who said that the bank, as the largest creditor, did not want to take over Agrokor but was preparing a quarterly liquidity plan that should soon be approved.

Poletaev said that at that time, he wasn’t yet able to estimate how much additional funding would be needed. They’d hired experts because they wanted to understand why such a (previously) stable business was facing a liquidity crisis, and after this major crisis was resolved, Sberbank would be willing to consider the possibility of a long-term restructuring plan in order to deal with Agrokor’s huge debts.

“It would probably make sense to sell some parts of the company that are not essential to the underlying business, as well as to look for investors with a lot of experience in that industry,” Poletaev added.

March the 19th:

Agrokor made a statement to the public due to the leaking of information, including a large number of incomplete and inaccurate publications within the media:

“We want to reiterate that Agrokor is the largest Croatian and regional company with strong brands, a strong market position and quality employees. The company’s management, together with key investors, is working on repositioning the system and a new business model that will protect the interests of all of its stakeholders. The selected model will soon be presented to all key partners and employees.”

March the 20th:

MOST’s Božo Petrov stated that the government would defend Agrokor as an economic system, but not its owner, Ivica Todorić.

Representatives of some of Agrokor’s largest suppliers held a meeting to define their common positions while addressing the problem of non-liquidity within Agrokor.

March the 23rd:

Three reports against Finance Minister Zdravko Marić were received, the notion of all of them was concern that prior to taking up his Ministerial duties, he was Agrokor’s employee.

March the 24th:

Deputy Prime Minister Martina Dalić announced that the government would soon adopt a special law that would apply only to ”systemically important companies” which have at least 8,000 employees and at least one billion euros of debt that the company itself cannot deal with, in order to protect the economy when such companies face difficulties which cannot be resolved internally.

“The basic aim of this special law is to create conditions for the payment of the supplier and normal business of the company. I would like this law to never have to be applied to any company,” remarked Dalić.

March the 27th:

Agrokor’s boss Ivica Todorić met with the representatives of 30 suppliers, with whom he discussed Agrokor’s current activities and plans to process the stabilisation of the company.

Agrokor suppliers, however, argued that they expected a clear and transparent debt servicing plan for them and a clear view of financial lenders, in the shortest possible time.

March the 29th:

VTB’s Yuri Solov told Reuters that a group of Agrokor lenders would sign a Stand Still agreement that very week.

In his words, the company’s problems were caused by irregularities in the running of its business books, for which the owner and company management were entirely responsible.

Naturally, reactions didn’t take long to start surfacing.

“Our view is that the company is no longer able to maintain a high level of obligations towards its suppliers, which can limit its liquidity. The company has limited resources for additional sources of liquidity due to its limited access to credit markets and reliance on a limited number of banks,” stated Moody’s, in yet another telling blow.

March the 30th:

The suspicions held by VTB regarding irregularities in Agrokor’s financial statements caused a sharp drop in the prices of Agrokor’s shares, the Crobex index at the Zagreb Stock Exchange sank more than 3%, and the political scene was visibly shaken.

As a neutral person, MOST’s Božo Petrov filed a criminal charge against the Agrokor Administration led by Ivica Todorić for allegedly lying in the company’s financial statements, calling upon the relevant institutions to do their jobs.

“By saying he has nothing to do with this, he’s made his decision and knows that Agrokor is in bankruptcy, resulting in damages of millions of kuna that will never be returned,” Ivan Pernar said in reference to the Finance Minister.

March the 31st:

The government submitted a bill on the procedure of extraordinary administration in companies of systemic importance. Under “Lex Agrokor”, the government would propose an extraordinary trustee to be approved by the Commercial Court in Zagreb, either at the request of the debtor or at the request of the creditor, but with the consent of the debtor.

“This isn’t about nationalisation or any kind of state intervention that would undermine anyone’s property without privy. This law respects the Constitution, the inviolability of property rights, as well as free enterprise,” Prime Minister Plenković stated.

An Extraordinary Trustee has the task of ensuring the company’s regular operations, providing fresh liquidity and embarking on the restructuring process for the purpose of company sustainability, economic health and job preservation, if the stabilisation and restructuring process fails, the company would go bankrupt.

And while the government adopted ”Lex Agrokor”, SDP deputy Gordan Maras called upon MOST to say whether or not the Minister of Finance, Zdravko Marić, could enjoy their trust. Maras believed that MOST had information on criminal offenses within the company.

Finance Minister Marić said that he didn’t feel any pressure to resign, that the protests of the political opposition were unfounded and that, while he worked in Agrokor, it was not his responsibility to draft financial reports.

On the economic scene, however, Croatian National Bank’s (CNB/HNB) Boris Vujčić governer attempted to calm people’s nerves by stating in an interview that any systemic risks for the Croatian economy due to Agrokor’s problems would primarily depend on how the restructuring of the company went, and that the banking system was stable.

The storm on the political scene in March continued to whip up speed in time for April as a hurricane hit the government after the ruling coalition between HDZ and MOST split over the conflict about Zdravko Marić’s involvement in the Agrokor crisis, a complicated situation which was growing ever messier.

April the 2nd:

A monatorium on Agrokor’s existing banking obligations was announced.

The CEO of Sberbank Croatia, Mario Henjak, said that they had a “clear plan, clear steps to be taken in the coming days, from alignment with the existing owners and management of Agrokor, management changes, through the injection of additional funds into the company and the active restructuring of the company”.

April the 3rd:

Following the meeting of 50 Agrokor suppliers, Franck’s Board member Josip Budimir pointed out that the suppliers were all unique in their various demands towards the banks.

Prime Minister Plenković said, after the meeting with the suppliers, that “the government is working intensively to calm the overall political and public reactions to the situation within the company” and how dialogue with both the company, the suppliers and with the creditors representatives was being undertaken.

Božo Petrov contributed to the calming of the situation, saying that the Minister of Finance, at least at that particular moment in time, had MOST’s support, but that “he would like to examine all the circumstances surrounding Mr. Marić.”

“I don’t want to act against a person if I’m not sure whether or not that the person has done something bad,” Petrov stated.

April the 4th:

Antonio Alvarez III arrived in Zagreb and said that the situation in Agrokor was very demanding, that it was important, and that there was no cast-iron guarantee that things would necessarily be successful.

“This is one of the most challenging situations we’ll face,” Alvarez warned, pointing out that he wasn’t working for anyone except for the company and all its stakeholders.

The news that Antonio Alvarez III would become Agrokor’s head of restructuring was unofficially announced in the media.

April the 5th:

Prime Minister Plenković said that “Lex Agrokor” was not a law solely for Ivica Todorić, but a law that would enable the government to protect the interests of the financial system, the economy, the workers and employees of Agrokor, the suppliers and all the stakeholders involved in the processes associated with the situation.

“Scenario A”, said Plenković, was currently taking place: “Through dialogue with stakeholders, the owner and the management bodies, we’re trying to find a solution, and this means fresh liquidity. Fresh money needs to be used for business, employee salaries, the settlement of tax liabilities and payment to the suppliers, as well as to all who rely on the business of our largest company.”

The law, he said, was written on the basis of similar situations in other European Union countries which have resorted to specific legal regimes and have tried to solve such problems in the best interests of the state and the general good.

“The circumstances are extraordinary and require extraordinary action,” Plenković said after he presented the “Lex Agrokor” law to the representatives, explaining that they’d have to resort to “Plan B” if “Plan A” were to fail, such as if creditors, suppliers, the administration and the owner didn’t manage to find a solution to the rapidly increasing problems in Agrokor.

That evening, Plenković met with Antonio Alvarez III and said: “I think the most important message to give to the Croatian public, the media and everyone in this whole situation is to send a message of trust in the legal framework and the signals towards potential creditors, restructuring, the long-term sustainability of the company’s business and the stability of the economy.”

As with most things in life, what goes up must come down, and Standard & Poor’s broke the slightly more optimistic mood by lowering Agrokor’s long-term and short-term rating from ”B- / B” to ”CC” that very same evening. This move shed light on the view that Agrokor would probably need to undergo unfunded credit restructuring, which would be equal to bankruptcy according to S&P’s criteria.

April the 6th:

As things continued to take a turn for the worse, Agrokor’s suppliers gave a 24-hour deadline to resolve the problems, or they would simply stop delivering goods.

When asked about the “Lex Agrokor” solution, the CEO of Dukat said that they would support every option that would help drive things in the direction of solving the problem, because “this was not a question of a company, but a question of 100,000 people who depend on the outcome of this problem.”

On the same day, Parliament passed “Lex Agrokor” by a majority vote. Of the 131 representatives present, 83 MPs voted for the law, 46 against, and two abstained.

Examinations at Agrokor began.

April the 7th:

“I’ve made this decision in the belief that it is in the best interest of every employee, partner, supplier, other stakeholders and the entire economy.” stated Ivica Todorić.

On the same day, it was announced that there would be a suspension of the delivery of goods on the following day, with the exception of fresh bread, an incredibly uncomfortable situation which would last until an agreement with the banks was reached.

April the 8th:

In those days, supplier meetings were a regular occurrence because the crisis was at its peak, and the interests of suppliers, banks and other participants were not yet reconciled.

After yet another meeting, representatives of Agrokor’s producers and suppliers said that they were expecting a meeting with a future commissioner at Agrokor, to whom they’d present their basic requirements to continue delivering Konzum goods.

The same day, MOST MP Miro Bulj announced that he was going to file a criminal complaint against the Croatian National Bank, Boris Vujčić, the Croatian Financial Services Supervisory Agency (HANFA), and all who enabled Ivica Todorić to activate bills of exchange of up to 10 billion kuna.

He also said he expected that the former majority owner of Agrokor would have his property taken and be sent to jail. He added that Minister Zdravko Marić did not have his support and that the state did not have a Finance Minister.

April the 10th:

The government made the decision to propose Ante Ramljak as extraordinary commissioner in Agrokor. The Commercial Court in Zagreb then enabled Agrokor’s bills to be unblocked.

“Today is the beginning of a systematic and thorough crisis resolution, and, above all, the first phase of the restructuring process of Agrokor, and the key is to get fresh liquidity, that is, new assets that are creditors, so that salaries will be paid to employees,” said Plenković.

Ante Ramljak said, “The battle for Agrokor, Agrokor’s employees, suppliers, creditors… ahead of us is a struggle to make sure that business problems in Agrokor don’t spill over into the rest of the economy.”

On the same day, Plenković stated that creditors’ representatives supported the legal and institutional framework for Agrokor and would provide the first tranche of liquidity for the group.

Reflecting on the bill of exchange, Plenković said banks expressed their understanding of the specificity of this problem: “We will use all the mechanisms to find a solution in which the one who was the ultimate user of these funds would eventually return the funds.”

On the same day, just four days after the adoption of ”Lex Agrokor”, the Constitutional Court sent the first proposal to review the constitutionality of that law, submitted by Goran Vojković, because the law was allegedly in contradiction with entrepreneurial and market freedom as the basis of the economic structure, which prescribes that the state ensures equal legal status for all entrepreneurs in the market. Vojković also pointed out that laws should be written for “general and future situations, and not just for a particular company”.

April the 11th:

Ante Ramljak has announced that all Agrokor emloyees would be paid by Friday.

By that same evening, Moody’s had lowered Agrokor’s rating for a third time from Caa1 to Caa2. This marked the third lowering since the beginning of the year and raised the dire probability of bankruptcy even more.

“Our decision to lower Agrokor’s rating reflects its application for restructuring in accordance with Croatian law, which, in our opinion, makes bankruptcy highly probable. It also takes into account the uncertainty surrounding the restructuring process, as the creditor’s ability to repay money, which depends on the number of factors that will only be seen over time,” stated Moody’s.

April the 12th:

Sberbank was ready to approve new financing to rescue the company, provided that the 100 million euro stabilisation loan approved by Agrokor earlier this year would be treated as the oldest claim.

“If our condition is not accepted, our participation will be insignificant,” Poletaev said.

CEO of Sberbank Croatia, Mario Henjak, explained that 75 million euros of this loan went to the payment of suppliers, 21 million euros for the payment of tax liabilities and 4 million for employee salaries.

April the 13th:

Ante Ramljak reported that four Croatian banks had signed a credit agreement worth 80 million euros: “I think we did a great deal, all the salaries were paid, so we ended this week with very positive and good results” .

Talks with Sberbank about further lending to Agrokor were set to continue, Ramljak said.

April the 20th:

“We’re currently negotiating with the government and the creditors about what restructuring is needed and what we will do next,” stated Herman Gref for the Russian media.

April the 21st:

SDP submitted a proposal for a decision to establish an investigative commission to determine all the facts that led to the crisis in Agrokor in the first place. SDP President Davor Bernardić said that the circumstances over the past 27 years that led to this situation should be clearly established.

April the 27th:

It was found that potential ”misstatements” in the group’s financial statements could be identified, and it was later announced that the plan was to appoint PricewaterhouseCoopers (PwC) as the auditor for 2016. Consequently, the group asked the involved parties not to rely on the financial statements from the past until verifications were completed and the situation was clarified.

Therefore, on the same day, the Zagreb Stock Exchange suspended the trading of shares in eight different Agrokor companies – Ledo, Belje PIK Vinkovci, Tisak, Vupika, Zvijezda, Žitnjak and Jamnica.

This, although unfortunate, stopped the agony within the stock market, given that since the beginning of the year, the prices of Jamnica, Ledo, Belje, Vupika and Zvijezda sank by a shocking 60%.

On that day, the drama did not only take place on the stock market but on the political scene as the HDZ – MOST coalition began to collapse.

April the 27th:

Prime Minister Plenković dismissed MOST’s ministers following their vote of no confidence against Finance Minister Zdravko Marić.

Explaining later why he voted against Marić, the former Justice Minister, Ante Šprlje, said: “Responsibility for the resulting situation must be borne by the people who are responsible for this situation. The Republic of Croatia has given credit to Agrokor via HBOR, and someone has persuaded us that this is all fine and that there’s no problem. Someone has to bear responsibility.”

Plenković’s unexpected decision led to further disturbance on the political scene. After the initial shock, Božo Petrov said the next day that all MOST members of the government would resign.

“We’re no longer part of this government,” Petrov said, stating that MOST would always fight against the crime in Agrokor, which he claimed Plenković and Marić were protecting with such a move.

Political instability continued and miraculously, Marić remained in his Ministerial position.

Gordan Jandroković from HDZ replaced Petrov as Parliament Speaker.

While Agrokor’s internal issues were being somewhat overshadowed by the political volcano that had subsequently errupted, negotiations on a new Agrokor loan and the settlement of supplier problems were under way, and Ramljak reported that Agrokor’s debts had indeed exceeded an incomprehensible 40 billion kuna.

May the 8th:

Standard & Poor’s lowered Agrokor’s credit rating from CC / negative / C to SD / – / SD because the company did not pay a coupon on its 300 million euro bond on May the 1st.

May the 11th:

The European Commission stated that the decline in the growth of Croatian domestic products was probably linked to the crisis in Agrokor, which faced the problem of all the aforementioned refinancing obligations.

“Problems that emerged in the first part of the year could slow down consumption and investment, and affect confidence. Despite these difficulties, the positive trends seen in 2016 should continue,” the Commission stated.

On the same day, the government, at the request of the State Attorney’s Office (DORH), approved 5 million kuna from the budget to settle DORH’s costs related to determining possible irregularities in Agrokor.

“This is a clear demonstration that it is in the interest of the government to legally and institutionally assist the competent institutions to close all developments in Agrokor and, if necessary, initiate the appropriate criminal proceedings”, stated Prime Minister Plenković.

On that same day, Agrokor reported that at the end of March this year, the debts of the company amounted to 40.4 billion kuna, with the largest debt to financial creditors – 24.5 billion kuna.

May the 16th:

For the first time since the outbreak of the crisis in Agrokor, Ivica Todorić commented on the situation facing the giant company, and in his statement for the Nacional newspaper, he said that the main goal should be to save Agrokor, all jobs and solve the problems with the suppliers.

“The input and output of each kuna can be documented, and the overall debt and value of the company is in balance,” Todorić told his personal advisers, among other things, as Nacional wrote.

“One of the top four world-class auditing companies will review the books, and then we’ll be able to see more details here. None of us has a detailed insight into their financial books,” remarked Plenković.

May the 23rd:

Extraordinary Commissioner Ante Ramljak filed a lawsuit at the Commercial Court in Zagreb against three key Agrokor people: Ivica and and his son Ante Todorić, as well as Ivan Crnjac.

The announcement made it clear that this annex to the contract was signed ten days before the opening of the Agrokor’s extraordinary administration process and could cause material damage to the company because it was contracted that Agrokor would bear all the damages that former members of the Management Board could face, owing to the possibility of arbitration and other actions directed towards them.

May the 29th:

Prime Minister Plenković talked with the government and with Sberbank’s Maksim Poletaev, who, after talks with reporters, said that a solution should be found around Agrokor and that the continuation of the financing of the company would depend on the “level of cooperation”.

Plenković said that there was nothing in the conversation to suggest that the state would take over the burden of Agrokor’s debts and he stressed that Sberbank’s interest in Agrokor was solely business or commercial oriented. He added that there were no additional elements.

Ante Ramljak assessed that he had an open and constructive conversation with Sberbank’s representatives, who also talked about the new model of financing the company in which the Russian bank offered to participate. He also outlined a lending scheme with a roll-up option.

May the 30th:

A monthly report on the economic and financial situation had been published, which estimated that Agrokor did not have a business plan for 2017 and was suffering a serious management crisis.

According to the report, as of March the 31st, 2017, the largest non-bank creditor was Adris Group, with a sum of 967 million kuna, and the largest unsecured bank lender was Sberbank, with a sum of 8.16 billion kuna.

May the 31st:

Emil Tedeschi argued that it was very likely that Agrokor’s creditors would have to write off some of their claims against the group. Tedeschi said that “we all have to realise that this is happening for the first time and that we have not had such a corporate crisis so far.”

Early June was marked by the offensive of the Russian banks warning of the entry of speculative funds into Agrokor, the question of the loss of pension funds was raised on the political scene, while the government argued that the situation in Agrokor had stabilised.

June the 1st:

Sberbank said it would not participate in the new financing of Agrokor because it believed that the provided conditions were unfair.

Extraordinary Commissioner Ramljak proposed a new scheme of financing the company to creditors in the form of what are commonly known as ”roll-ups”.

“When we asked for such a status for our 100 million euro claim, they refused because it was not in line with ”Lex Agrokor” and now these terms have been proposed to everyone, including funds that have bought the debt on the market for 30 to 35 percent instead of its [actual] value, we don’t understand that logic,” Sberbank’s Maksim Poletaev stated in obvious dissatisfaction.

The next day, Herman Gref assessed that the investment climate in Croatia would go from bad to worse if Croatia’s agreement on Agrokor’s credit was not reached.

“Sberbank has negotiated with Agrokor’s creditors, talks with the government will continue and if no compromise is found, Croatia’s investment attractiveness will fall,” Gref said.

June the 3rd:

Moody’s lowered Agrokor’s rating for the fourth time since the beginning of the year, from the previous Caa2 to Ca, maintaining negative prospects and raising the likelihood of bankruptcy with Ca-PD at D-PD because the company did not pay a coupon on its 300 million euro worth of bonds.

“Moody’s sees the risk that some creditors, such as local suppliers, could be paid before international creditors. Additionally, issuing an extra super debt above 80 million borrowed on April the 14th, 2017 would increase subordination to existing debts,” the agency stated.

June the 6th:

VTB Bank would propose a change of Agrokor’s shareholder structure within the framework of the debt restructuring plans being prepared by creditors, Yuri Solovy told Reuters.

“When we made the decision on the loan, the company’s financial metrics were much better, the debt was considerably smaller, and afterwards, we found some inaccuracies in the books that prompted internal investigations into Agrokor after my public appearances in March,” he stated.

June the 8th and 9th:

Approval to the emergency management board for the signing of a 480m financing agreement was granted, involving 80m euros of loans granted to Agrokor by domestic banks in April, 2017.

A new 480 million Agrokor loan would be provided by bond holders led by Knighthead Capital Management.

In addition to this amount, additional buffers were also provided with an additional 50 million euros of potential refinancing commodity credits, so the total amount secured was 530 million euros.

New funding ensured the survival of Agrokor’s system of operations.

On the same day, Sberbank reported that the Commercial Court in Zagreb had filed a motion to ban Agrokor’s Extraordinary Commissioner Ante Ramljak from concluding new financing contracts involving the controversial roll-up model, because that model had been met with dissatisfaction and was considered contrary to ”Lex Agrokor”.

The Commercial Court later rejected the proposal of that bank.

June the 12th:

Deputy Prime Minister Martina Dalić said that the most vulnerable stage in the stabilisation of Agrokor was now complete, with full focus on liquidity, the stabilisation of operations and the prevention of the ”leakage” of Agrokor’s problems upon the rest of the economy.

She also pointed out that Agrokor was in the midst of the very difficult and complicated process of reaching a settlement and restructuring, where it will certainly be necessary to make many difficult decisions.

Just one hour later, SDP MP Gordan Maras requested that the Parliament discuss SDP’s proposal as soon as possible on the establishment of an investigative commission for Agrokor because it could open the can of worms that the duty of paying off Agrokor’s debts would fall on taxpayers.

June the 14th:

Agrokor’s companies reported that the auditor’s report for 2016 would be ready by July the 31st, and the financial statements for the first and second quarters of this year would be done and ready by August the 31st at the very latest. It was stated that the audit report would not be completed until the end of September 2017.

June the 16th:

Thomas Wagner of Knighthead Capital Management said they had a positive view of Agrokor’s business in the future and considered it a fantastic company.

Wagner said that Knighthead had been following the company for some time. He pointed out that Knighthead, along with Zagreb Bank, provided funding for Agrokor in the amount of 400 million euros.

June the 20th:

A detailed analysis of Agrokor’s core business continued, and certain assets would be sold throughout the year, it was also stated that the Agrokor Group held shares in 143 companies.

In July, Ante Ramljak, the extraordinary commissioner, said that bankruptcy had been avoided, and an agreement has been reached that all old debts would be paid to small suppliers.

July the 5th:

Extraordinary Commissioner Ante Ramljak said that Agrokor’s new loan of 480 million euros had involvement with 20 domestic and foreign banks, including Russia’s VTB Bank, and that all the debts to small suppliers should be settled by the end of July.

The first 30 million euros from the new loan would be paid by the end of July, with 100% of the old debt paid to small suppliers, OPGs and micro-companies with revenues of up to 5.2 million kuna a year.

“We survived, we managed to preserve the company, there would be no bankruptcy, Now we go to the second phase – restructuring of the company,” said Ramljak, adding that this phase would last until the final settlement was concluded.

July the 6th:

Konzum will increase salaries by 8% on August the 1st for 6,000 workers with the lowest coefficients, and by the end of the year, the plan is to close 105 stores.

It was also reported that the process of restructuring Konzum was under way, which by the end of the year, as stated, planned to close 105 ”unprofitable” stores in Croatia, a move which would directly affect a total of 870 employees. More than 80% would be placed in positions at other, unaffected Konzum stores.

July the 12th:

SDP President Davor Bernardić told the Parliament that his party’s deputies sought the formation of an investigative commission to “find out” just how Agrokor fell into such deep troubles, pointing out that an agreement on his party in the parliamentary committee about the investigative commission was conditional on the vote on constitutional judges.

“What is hidden behind the scenes which will affect everyone in Croatia?” asked Bernardić.

He noted that Ivica Todorić had long since been ”untouchable” and had enjoyed a very privileged status at all levels, growing thanks to HDZ and Dr. Franjo Tudjman’s support, as well as owing to the support of other governments.

The HDZ Parliamentary Group did not support the SDP proposal to set up an investigative commission in Agrokor.

July the 20th:

Plenković stated that the government did what was best for the economic stability of Croatia and the financial system at that point.

”By passing the law on emergency management, a possible bankruptcy of the company, a chain reaction to the economy, suppliers, jobs, etc, was blocked,” Plenković said in a government debate on the report about applying the ”Lex Agrokor” law.

He said that in just over three months he was able to stabilise the company’s state of affairs, pay wages, retain jobs, consolidate business, and obtain the prerequisites for creditors to give fresh liquidity on two occasions.

He also added that the relevant state institutions and judicial bodies were carrying out their [necessary] activities.

July the 25th:

Ante Ramljak, Agrokor’s government appointed extraordinary commissioner, said in an interview that an audit in Agrokor would yield drastic surprises in terms of value adjustments.

There were no major events in August that would determine the future destiny of Agrokor, and things remained calm for a while, it was only during September that Sberbank announced a lawsuit, and Ivica Todorić attacked the government, bombaring various politically powerful individuals with bizarre acusations via his now infamous blog.

August the 30th:

The Central Bureau of Statistics announced that the Croatian economy grew by 2.8% in the second quarter compared to the same period last year.

“Economic growth has improved slightly when compared to the first quarter” said Alen Kovač, a Macroeconomist from Erste Bank.

He added that the third quarter is expected to continue on with such positive trends due to excellent tourism results, while in the fourth quarter, he will see whether economic growth will be hit by the slow restructuring of Agrokor. Kovač stated that significant negative pressure from this isn’t something that should be expected.

September the 5th:

Several Agrokor companies reported that they had signed a pledge agreement on their property.

Upon media questioning, Prime Minister Plenković dismissed growing speculation that Agrokor’s Commissioner, Ante Ramljak, had made a deal on new loan with American banks and funds provided water sources, agricultural land and valuable companies.

September the 9th:

Russia’s VTB Bank expected to be able to charge at least 50 to 60 percent of Agrokor’s debt of 300 million euros.

September the 11th:

Deputy Prime Minister Martina Dalić said that the future ownership structure of Agrokor’s companies would depend on the creditors, namely upon whatever settlement plan was reached.

September the 13th:

Sberbank demanded compensation from Agrokor in court. It was claimed that it had been confirmed that Agrokor had knowingly falsified business reports and had hid liabilities totalling more than a billion dollars.

“This case is unprecedented, there is such deception, when the administration is hiding the real state of affairs, and is hidden behind the imbalance of obligations of more than 1 billion dollars… This is the first such case we’ve been met with” stated Gref.

September the 15th:

Since the beginning of the extraordinary administration process in Agrokor, several litigation and enforcement proceedings had been launched in Croatia and in five other European countries – Slovenia, Serbia, Bosnia and Herzegovina, Montenegro and the United Kingdom against the company, as well as against part of its affiliated and related companies.

“The extraordinary administration will take all the necessary steps regarding all the procedures in accordance with the law on the procedure of extraordinary administration and in the best interest of Agrokor,” they stated from Agrokor.

September the 21st:

A source closed to Agrokor’s restructuring process revealed to Reuters that the first proposal for Agrokor’s deal with its creditors is expected in November this year.

He also said that 15 months, which is as long as the mandate of the extraordinary administration is due to last, is enough time to reach a final settlement and complete the restructuring process.

September the 22nd:

Ivica Todorić started his blog and in the very first press release, he called upon the government to ”withdraw their political moves”.

Todorić announced that public statements and the release of various relevant documents would fully disclose the alignment of politics and private interests. He also refers to the implementation of ”Lex Agrokor” as illegal.

In reponse to a question put by a journalist, Deputy Prime Minister Martina Dalić asked rhetorically if people really think Ivica Todorić is important enough for the government to have to comment on every one of his cyber outbursts.

However, just one day later, Dalić said in spite of everything, Todorić was still registered as an owner of Agrokor.

When faced with Todorić’s online claim that the request for emergency management was signed under ”duress, force and blackmail”, Prime Minister Plenković said that there was no pressure from the government. “There was no pressure, I can assure you, especially not from the government.”

“We’re absolutely open to investigating everything. What we don’t want is for any investigative commission’s work to affect the fundamental work of judicial bodies.”

“The Croatian public deserves to know the truth. Why has the government been hiding information about the state of affairs in Agrokor for five months now? This is another confirmation of the importance of the investigative commission,” SDP’s Davor Bernardić said.

September the 23rd:

Ivica Todorić announced that he is in support of the establishment of a parliamentary inquiry commission for Agrokor, which he considers necessary to shed light upon all of the circumstances.

In his later postings on his blog, Todorić said that Ante Ramljak was in a conflict of interest because Ramljak and his associates were the ones who actually wrote ”Lex Agrokor”.

“How can it be that the same person who was involved in the creation of Lex Agrokor, who designed those powers himself, then sets himself up to be the one to apply that law?!” Todorić writes rather bluntly.

He then stated that in the ”demolition” (as he refers to it) of Agrokor, state officials and related persons ”violated several laws”, before calling on the relevant state institutions to examine the conduct of various state officials and their affiliated persons.

September the 25th:

Deputy Prime Minister Martina Dalić commented on Todorić’s announcements regarding the then upcoming revision of the audit report:

“I think that all these announcements are related to the upcoming release of the audit report and until we know [the content of] that report, I wouldn’t make any more comments on Agrokor.”

“We’re expecting an audit report and that’ll be, I believe, a very important topic for comments and, of course, confirmation of the state of affairs in Agrokor and of how it was in 2016,” Dalić added.

September the 28th:

In is latest blog post, Todorić writes that he and his family were under pressure to sign the activation of ”Lex Agrokor” and claims that he and his son were threatened by Deputy Prime Minister Dalić and Commissioner Ramljak. However, following the examination of all electronic devices, as requested by Dalić herself, it would seem no such threats have taken place, at least not by email, which is what Todorić so boldly and openly claimed.

September the 29th:

Deputy Prime Minister Dalić said that Todorić’s online allegations of threats made by her were “an outrageous lie”.

Although announced for a long time, Agrokor’s auditing report on 2016 was not published on that day.

“Agrokor and PwC have not yet completed their complex task of preparing and revising the consolidated financial statements of Agrokor, which consists of more than 40 companies in several countries. Agrokor expects to publish the revised consolidated financial statements by the end of next week,” stated an announcement from Agrokor.

October the 4th:

“The crisis in Agrokor is the biggest social crisis since the war and this crisis is extremely complex,” said Emil Tedeschi, explaining that it is not just about economics and crisis management but also a crisis of ethics, the understanding of the functioning of the public administration, private companies, and indeed our society.

“I think that the crisis in Agrokor sublimates all the problems in Croatian society and regional societies as a whole,” he said.

October the 5th:

Today, Agrokor’s long-awaited, much anticipated audit report was finally published.


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