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* Croatian food and retail giant on brink of collapse
* Summer tourist season key for debt-laden Agrokor
* Set 15-month deadline to complete restructuring
* Agrokor crisis threatens government, economy and Balkan
By Michael Kahn and Igor Ilic
PRAGUE/ZAGREB, May 11 A native of Croatia’s
Dalmatian coast, Ante Ramljak will be well aware of the
importance of the roughly 15 million tourists who will descend
on the rocky coastline and green islands of this Balkan country
over the course of the summer.
The food, drink, sun lotion and nappies those tourists
expect to buy are considered key to Ramljak’s immediate efforts
to stabilise Croatia’s teetering food and retail giant Agrokor
after the government appointed him to stave off a
bankruptcy that could send shockwaves through the region.
The potential collapse of Agrokor, which is the biggest
employer in the Balkans and accounts for 15 percent of Croatia’s
economic output, would almost certainly snuff out the flickers
of recovery from three years of biting recession and could even
topple the government of the European Union's newest member.
Keeping shelves stocked at the 700 stores of the
Agrokor-owned Konzum supermarket chain, many of them the only
shops for miles among scattered coastal villages, will be
crucial to a successful restructuring of Croatia's biggest
“The key challenge is not allowing Konzum to stop. If that
stops, they are in trouble, as Konzum has been the
cash-generating machine,” said Luka Oreskovic, a partner at
investment and advisory firm Spitzberg Partners.
“If they don't have stock, they lose the shopper. So they
need to fill the shelves ahead of tourist season and invest in
Once lost, the cost of winning back shoppers would simply be
too great, added Oreskovic, who estimates that Agrokor needs to
find about 200 million euros ($217.4 million) to see it through
Ramljak did not respond to a request for comment but had
said on his appointment that Croatia faced a “battle for
Agrokor, a battle for Agrokor’s employees, suppliers and
The experienced businessman and former government energy
adviser was parachuted in as Agrokor's crisis manager after the
country’s richest man, Ivica Todoric, surrendered control of the
company he founded in 1976.
Todoric, who still owns more than 95 percent of Agrokor,
built up the company through an aggressive acquisition drive in
Bosnia, Serbia and Slovenia but in so doing generated debts
estimated at 45 billion kuna ($6.6 billion). That equates to six
times Agrokor’s equity.
Yet no one knows if that is the true magnitude of the debt.
Creditors have until June 9 to submit claims and
PricewaterhouseCoopers has been brought in to review past
financial reports after Agrokor said it may have made errors.
“There are so many things that we don't know concerning the
level of the company's debt,” said Andrew Carrie, an analyst at
Stifel Nicolaus in London. “There is no base from which to make
The conservative-led government of Prime Minister Andrej
Plenkovic interceded in early April, effectively overriding an
earlier standstill agreement reached between Agrokor and six
lenders led by Russia’s Sberbank and VTB.
Sberbank and VTB’s exposure amounts to about 1.1 billion
euros and 300 million euros respectively, giving Russia a
potentially powerful lever of influence over the NATO member
should Agrokor go under.
The government acted after Agrokor’s suppliers began halting
deliveries. Owed about 16 billion kuna, suppliers feared they
would be left last in the settling of Agrokor’s debts and might
also be held liable by the banks for Agrokor promissory notes.
Under emergency legislation dubbed the Lex Agrokor law, the
company has been set a 15-month deadline to complete its
restructuring, with the government also appointing New
York-based turnaround specialist AlixPartners as an adviser.
AlixPartners did not respond to a request for comment but
has said that it would first focus on securing fresh liquidity.
Agrokor, which has interests in a vast array of businesses
from construction to commodity trading, travel and tourism,
secured an initial 80 million euro cash injection from five
local banks in April, but Ramljak has said the company will need
450 million euros this year to operate normally.
A VTB spokeswoman declined to comment on the restructuring
but a Sberbank spokesman this week said that the bank expects
the first draft of a restructuring plan within six weeks.
Agrokor, meanwhile, must consider the prospect of being
forced to shed prized assets such as water bottling business
Jamnica and frozen foods and ice cream maker Ledo.
“Agrokor has some crown jewels it can sell," said Andrej
Grubisic of Zagreb-based corporate finance consultancy Grubisic
“The real cash cows are Ledo and Jamnica. But if they sell
these as part of the restructuring, I'm sure they will get less
than they wanted.”
He warned, however, that politics could get in the way after
Plenkovic’s fragile coalition was split on a motion to dismiss
Finance Minister Zdravko Maric over his previous involvement
with Agrokor as its director for strategy and capital markets.
Maric narrowly survived the vote, but Plenkovic is left
looking for new partners to secure a majority in parliament or
face a snap election.
These factors could leave the government reluctant to make
tough decisions, such as cutting jobs or selling off non-core
businesses to keep Agrokor afloat.
“If the government decides it wants to protect jobs, the
restructuring could run into problems,” Grubisic said.
“Whoever is implementing the restructuring needs to have a
free hand to cut where needed, even if that means blood.”
($1 = 6.8217 kuna)
($1 = 0.9201 euros)
(Additional reporting by Alexander Winning in Moscow; Writing
by Matt Robinson; Editing by David Goodman)