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10 I Companies & Markets bne May 2017
Agrokor giant brought down
by addiction to junk debt
Clare Nuttall in Bucharest
The collapse of Agrokor, the biggest food and retail group in the former Yugoslavia, will test states’ readiness and capacity to co-operate on a systemically important but hugely complex restructuring that spans the region.
Agrokor is one of the largest employers and suppliers in the region, and its liquidity crisis has raised concerns in all the countries where it operates. The company employs 40,000 people in Croatia, and 60,000 in total across the Balkans. Suppliers are particularly afraid: Croatian suppliers, which are owed around HRK16bn ($2.29bn), have asked their govern- ment to step in and help speed up the unfreezing of Agrokor’s accounts.
The affair has become very politically sensitive in Croatia, with the opposition Social Democratic Party blaming the problems at Agrokor on “crony capitalism” during the privatisation process, and it has sought to capitalise on Finance Minister Zdravko Maric’s stint at the company. The SDP also insists Croatian taxpayers should not have to shoulder the bill for the company’s debts.
Croatia and Slovenia have already passed special purpose laws to protect their interests of their suppliers and workers. Croa- tian government ministers, who initially tried to allay fears of problems at Agrokor, quickly pushed through a law enabling the state to offer assistance to systemically important companies
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that cannot repay their debts. This was followed by the govern- ment’s appointment of investment banker Ante Ramljak as emergency officer, though how he will work with the restructur- ing export appointed by the creditors remains to be seen.
Slovenia is afraid that Croatia will steer the restructuring so as to impose most of the pain on its neighbour rather than itself. The government has adopted "Lex Mercator", which
is intended to prevent the diversion of funds from systemi- cally important companies such as Agrokor’s Slovenian unit Mercator. Officials from Bosnia & Herzegovina, Montenegro, Serbia and Slovenia have also formed a joint ministerial team in response to the debt crisis.
Agrokor’s new turnaround expert has already warned that there is no guarantee that the heavily indebted Balkan food and retail giant will survive its liquidity crisis.
"Time is of the essence. The situation is pretty acute," Chief Restructuring Officer Antonio Alvarez of consultancy Alva- rez & Marsal told a press conference on April 4. "There is no guarantee we will succeed. This is one of the most challenging situations that we are going to face,” he added.
Alvarez’s appointment was part of a standstill agreement struck between the aggressively acquisitive Croatian company and its creditors after it spiralled into serious financial prob-
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