ZAGREB, March 9 (Reuters) - The Croatian government expects the management of the food concern Agrokor to take all possible measures to improve the company’s efficiency, Deputy Prime Minister and Economy Minister Martina Dalic said on Thursday.
“We’ve noticed (recent) assessments by rating agencies... The government is following developments related to Agrokor’s market standing. The owner and the management need to do everything possible to remove the potential instabilities as soon as possible,” Dalic told Reuters.
Zagreb-based Agrokor is the biggest food producer and retailer in the Balkans, employing almost 60,000 people across the region with an annual revenue of some 50 billion kuna ($7 billion). It is not listed, but owns several companies that are.
Moody’s and Standard&Poor’s recently cut Agrokor’s rating on debt servicing and refinancing risk worries. Moody’s flagged accounting transparency concerns.
Given Agrokor’s size, some analysts have voiced concern the government might find itself forced to step in should Agrokor fail to resolve its difficulties. One option for Agrokor could be the sale of some of its profitable assets, they say.
Russian banks, such as Sberbank, are among its major creditors.
Agrokor has repeatedly said in recent weeks it will continue servicing its financial obligations regularly as before.
At the end of September last year its debt amounted to some 45 billion kuna against the capital of around 7.5 billion kuna. The consolidated 2016 results for Agrokor concern are expected in late March or early April.
Since mid-January the yield on Agrokor’s 2020 bond has soared to around 25 percent from around 7.5 percent.
IFR news agency earlier reported that Agrokor’s debt stemmed from an acquisition of Slovenian retailer Mercator, which was funded with a 485 million euro deeply subordinated PIK toggle loan in 2014.
PIK toggle notes allow companies to make interest payments with additional debt if they are short of cash, meaning the size of the debt can balloon if not tackled quickly. ($1 = 7.0325 kuna) (Reporting by Igor Ilic, editing by David Evans)