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News 31 Mar 17

Emergency Deal Announced to Keep Croatia's Agrokor Solvent

Amid fears that Croatia's biggest private company could sink under its debts, Erste bank on Friday announced a 'standstill agreement' designed to keep the failing giant solvent during a restructuring process.

Sven Milekic
BIRN
Zagreb
Agrokor's logo on company headquarters in Zagreb. Photo: BETAPHOTO/HINA/Lana SLIVAR DOMINIC/MO

Austria's Erste Bank on Friday announced that Croatia's biggest private company Agrokor – currently embroiled in a deep financial crisis – and its creditors had reached a deal on a "standstill agreement" whereby the company will remain financially liquid while its debts are placed on "standby".

Agrokor's debts have piled up. It owes over 1.3 billion euros to the Russian state-owned banks Sberbank and VTB Bank, prompting fears that the banks might seize ownership and take over the management.

News of the agreement came amidst the situation in which Agrokor's account, as well as the accounts of its most prominent subsidiaries - Konzum, Jamnica, Ledo – have been blocked due to debts.

“Goal of the agreement are to facilitate efforts to stabilise the company's operations and ensure the settlement of trade payables towards supplier in the coming period,” Erste stated, as some of its suppliers had blocked Agrokor’s accounts on Friday.

“The standstill should facilitate the efforts of companies to address issues of liquidity, ensure business continuity, protect the value of the [Agrokor] Group, as well as present the basis for a sustainable restructuring of the Group,” Erste further stated.

The press release concluded that the management of the company would be strengthened by introducing a role of “chief restructuring officer” in the process of company restructuring.

Meantime, Croatia's centre-right government on Friday agreed the draft of the Law on Procedures for Extraordinary Management, a special law that would give the state a role in the crisis management of so-called “systematic companies” - companies deemed vital for the normal functioning of the economy.

Media have nicknamed it the "Lex Agrokor" since it only concerns companies with “5,000 or more employees” and only two private companies in Croatia meet those criteria - Agrokor and energy company INA, co-owned by the state and the Hungarian energy company MOL.

The company's role in the economy of Croatia is massive, with revenues of 6.5 billion euros in 2015 – almost 16 per cent of Croatia's total GDP – and around 40,000 employees.

Agrokor employs another 20,000 people in neighbouring Bosnia and Serbia, while it is believed that suppliers and companies for the Slovenian retailer Mercator – which Agrokor bought in 2014 – employ around 70,000 people in Slovenia as well.

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