April 7, 2017 / 1:18 PM / 3 months ago

Croatia food producers to halt most supplies to indebted Agrokor

2 Min Read

ZAGREB, April 7 (Reuters) - Local suppliers to Croatian food producer and retailer Agrokor said on Friday they would stop deliveries of almost all goods until the indebted firm's liquidity crisis was resolved.

Agrokor, the biggest food producer and retailer in the Balkans, accumulated debts of about 45 billion kuna ($6.43 billion), or six times its equity, during its expansion, notably in Croatia, Serbia, Slovenia and Bosnia.

The company, which has some 60,000 employees, is now drained of cash and many of its units have frozen accounts.

"We will stop supplying Agrokor from Saturday with all the goods besides fresh bread," a group representing suppliers to Agrokor said in a statement, adding supplies would not resume until a deal on repayments was reached.

Agrokor struck a deal last Sunday with six lenders, led by Russia's Sberbank and VTB, to freeze debt repayments and to secure an unspecified cash injection before restructuring the company's business.

The suppliers, including big producers and small family farms, did not join that agreement as they feared their demands for payment could be adversely affected by the restructuring.

Agrokor's retail chain Konzum controls around 30 percent of the local market.

Fearing the wider economic impact from Agrokor's debt issues, Croatia's parliament passed an emergency law on Thursday that aims to protect the economy from any big company failures.

"We are now waiting for developments related to potential activation of the law on big companies in trouble," the suppliers said in the statement.

Under the law to deal with problems at firms with at least 5,000 employees and debts of 1 billion euros ($1.06 billion), the state would be able to appoint an executive to steer restructuring at the debtor's request or if asked by creditors with the company's agreement.

Agrokor said on Friday it was studying the law's provisions.

($1 = 7.0010 kuna)

$1 = 0.9391 euros Reporting by Igor Ilic; Editing by Edmund Blair

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