What is Ramljak’s Next Move and What Can Agrokor’s Creditors Expect?

Lauren Simmonds

What can Agrokor’s creditors expect after reviewing the business books of Croatia’s largest private company?

As Poslovni Dnevnik reports on the 11th of October, 2017, it has been half a year since the activation of the so-called ”Lex Agrokor” (law). This delicate point in the process of Agrokor’s extraordinary administration has coincided with the uncovering of the burdened company’s bizarre audit reports. Perhaps yet worse, some of far more uncomfortable “mistakes”, for which Agrokor’s former leadership is responsible, were uncovered. These ”mistakes” have been being made for a long time and involve the purposeful hiding of certain monetary amounts and financial obligations, including, but not limited to massive loans.

Despite the much anticipated release of Agrokor’s audit reports last week, many findings remain unclear and somewhat obscure. All these questions, of which there now appear to be even more than there were before the release of Agrokor’s ”unusual” bookkeeping methods pose one very important conundrum – what does this all mean for Agrokor’s disillusioned creditors?

What kind of input does the auditor securing of the company offer in terms of the ratio of reported (undisputed) claims disclosed by Ante Ramljak, which will, in addition, be an important parameter for repayments with their corrected value(s)? For starters, it is worth keeping in mind that the claims filed include those from the first three months of this year, up until the activation of Lex Agrokor, when Agrokor found itself under huge liquidity pressures.

Shortly after entering the company, the Extraordinary Administration announced a framework review of the debt status of some of Agrokor’s extended companies (excluding Mercator) on March the 30th of this year. According to this account of the debts to various groups of creditors, the total amounted to a massive 40.4 billion kuna. This number also covered some loans which were seen as accounting irregularities from the 2016 audit. For example, it includes a billion euro plus Adris loan, although for years, this was recorded in the reports as a capital reserve rather than as a debt.

When it comes to the debt situation at the end of March this year, the same ”story” is true for almost three billion kuna of debt per bank loan, which had not previously been included in the company’s annual reports.

“The revised report is the beginning of the end of the Agrokor Group and at the same time, the starting point for the direction that could be taken for [debt] settlement,” notes Vlado Brkanić. He emphasises the key question – whether the continuation of business will take place in the form of existing subsidiaries and parent companies, or will the settlement agreements be done at the level of individual companies.

“It is undisputed that Agrokor has eaten itself [up] and that there is no longer any sense for it to continue to operate as a parent company,” says auditor Dubravko Kopun.

In order to meet the obligations, he says, it is necessary to sell all of Agrokor’s assets, which also consists of company shares in affiliated companies.

Unsurprisingly, a great deal of interest has followed Agrokor’s audit report not only because of the agonising wait, but because of the total amount of reported, disputed and established claims. It is a turning point in the entire complicated situation because the official figures now finally reveal how much, and to whom exactly Agrokor is indebted.

The issue of write-offs is tied only with the agreement of the creditor, and the amount to be written off, according to Vlado Brkanić, will depend on the state of indebtedness of a particular company, which means that on a colloquial basis it can be said that the write off will be 50%. Naturally, everyone would like to see as as few write-offs as possible, but the question of when such huge debts will be returned is an unmoving and increasingly difficult one.

Dubravko Kopun says that an approximately 45% write-off can be expected on average. Companies such as Jamnica, Ledo and Zvijezda are financially strong enough to fully repay their obligations, but the guarantees they have given for the credit of other group members exceed their assets multiple times over.

It remains to be seen whether Ramljak will write off liabilities at the same rate, irrespective of the financial strength of individual companies, or if he will go with the method of different write-offs which are dependant upon the financial strength of a particular company. In the latter case, this would mean an analysis of the financial capability of each one of the more than 100 companies within the Agrokor group, which is time-consuming, so everyone is more inclined to believe that the first method is the logical one to go with, which would mean the writing off of the liabilities at one rate, regardless of the financial strength of the individual companies in question.


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