LONDON, Feb 15 (IFR) - Moody's described Agrokor's
accounting as "opaque in certain areas" in a report published
Wednesday, although the rating agency believes the Croatian
retailer has sufficient liquidity in the near-term.
Debt at Croatia's largest private company has plummeted in
value in recent weeks on concerns around the company's finances,
with a holding company PIK note falling to as low as 25 cents.
IFR reported last week that investors were also concerned
around the company's accounting policies, particularly the way
the food producer and retailer accounts for investments at
subsidiaries in its cashflow statement.
In its report on Wednesday, Moody's said Agrokor's accounts
"suffer from a lack of transparency in certain areas".
"According to management, the cash flow statement includes
several undisclosed non-cash items," Vincent Gusdorf, a senior
analyst at Moody's, said in the report.
"The breakdown of the financial statements between the
restricted subsidiaries and the unrestricted subsidiaries is
also difficult to understand because certain adjustments made on
consolidation are not disclosed or explained."
The report notes that a non-cash inflow under Agrokor's
operating activities is balanced by a non-cash outflow under its
investing activities, to ensure its cash and cash equivalents
matches the amount on its balance sheet.
"This makes Agrokor's cash flow generation difficult to
assess," Gusdorf said.
RELIANCE ON RUSSIAN BANKS
The rating agency said Agrokor has enough liquidity to repay
its 2017 debt maturities - Agrokor's restricted group has "no
meaningful debt maturities" until September 2018 - even after it
terminated a loan syndication last month.
Agrokor's restricted group is the entity at which its senior
bonds sit, which excludes debt associated with Slovenia's
Mercator and the PIK loan. But recently signed loans at the
restricted group require the company to refinance the PIK 90
days prior to its mid-2018 maturity.
"However, the termination of the syndication is credit
negative because the company remains dependent on a limited
number of Russian banks with low credit ratings," Gusdorf said
in the report.
Moody's calculates that Russia's Sberbank and VTB together
provide €1.31bn of credit facilities, which correspond to 33% of
the group's debt and 52% of the restricted group's debt.
Agrokor's senior bonds fell to record lows on Friday after
Russia's ambassador to Croatia said the company may have
exhausted its credit with the country's banks.
"We've on several occasions credited Agrokor, believing it
will help stabilise the company. We're not considering fresh
loans," Anvar Azimov was quoted by the state news agency Hina as
"If Agrokor turns to Sberbank for a new loan, it will be
considered in the light of financial difficulties it is
Moody's rates Agrokor B3 with a stable outlook and did not
change this on Wednesday.
(Reporting by Robert Smith)