Decision Day for Agrokor?

By , 20 Mar 2017, 08:31 AM Business
Decision Day for Agrokor? Source: Agrokor

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Russian Sberbank, Agrokor’s largest creditor, to make key decisions.

The future of Agrokor, the Croatian largest privately-owned company, and its accumulated debts will perhaps be decided today. The debt amounts to at least 45 billion kuna, most of which has to be repaid by February 2020 at the latest. Given that the group uses its entire annual income to pay interest payments to creditors, it is clear that Agrokor cannot raise enough cash from its businesses operations. The largest single investor is Russian bank Sberbank, which holds 52 percent of total debt and 87 percent of the group’s debt to banks. They have taken the role of leader in negotiations with Ivica Todorić, the majority owner of the group, and it is expected that further plans will be announced this week, reports Večernji List on March 20, 2017.

Sberbank’s positions are known: they want their people in the company's board of directors, they want to take over control over financial restructuring and are willing to invest more money through a syndicated loan together with major Croatian banks, but only if Todorić agrees to give up on management of the company.

Agrokor’s key suppliers will meet separately today to negotiate their strategy, because Russian demands for significant debt write-offs could shake up their business. It is important for them to be involved in the process of restructuring. Therefore, they agreed to act jointly given that Agrokor owes them at least 16.5 billion kuna. They have asked Prime Minister Andrej Plenković for assistance. Also, leaders of some of the largest companies in Croatia are calling ministers and asking them for help.

The today’s meeting of suppliers will include representatives of Franck, Podravka, Kraš, Vindija, Dukat and Atlantic Group, which are among the largest suppliers of Konzum supermarkets. They want to know what will happen in the future, given that they sell as much as a third of their products in Konzum. Many suppliers complain that, even after Sberbank recently approved an emergency loan to Agrokor, they still did not receive money owed for their products.

The government has been actively involved in solving problems in Agrokor, which makes 15 percent of Croatian GDP. “The government is actively monitoring the situation in Agrokor. This week, discussions with representatives of the ten largest suppliers of Agrokor will start. The government demands from all stakeholders to preserve the stability of Agrokor, jobs, suppliers and all of Agrokor's partners”, said Deputy Prime Minister and Economy Minister Martina Dalić.

She explained that they had repeatedly met with the company’s management, as well as with Croatian and international creditors. She reiterated that the management and owner of Agrokor were responsible for business risks and must find a solution. At this point, it is difficult to guess what will happen, but it is likely that Todorić will have to agree to many of the Russian conditions because Sberbank’s support is key for a potential syndicated loan which would ensure repayment of debts until 2020. The price of the money will be high and will probably include loss of control over the company. In the longer term, the Russians want a new owner, which raises the question whether Croatia will lose control over its food industry.

“Survival of Agrokor is not in question. The company's management, together with key investors, is working on repositioning the group and a new business model which will protect the interests of all stakeholders, taking into account primarily the interests of employees, their jobs, suppliers and partners. The selected model will soon be presented to all key partners and employees. For Agrokor, the only acceptable model will be the one that will not be to the detriment of our employees and our suppliers and will fully protect their interests. It is important to emphasize that in this process we have the strong support of key stakeholders”, said Agrokor in a statement released on Sunday afternoon.

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