Mercator Negotiates with Banks on Loan Rescheduling

The Slovenian retail chain Mercator is negotiating with banks to reduce its debt and reschedule loans, as 45 percent of its financial obligations, amounting to one billion euros at the end of last year, are due this year.

-Mercator is highly indebted, but will continue to meet all its obligations. This year, 45 percent of all loans are due, and we have reached an agreement with key banks to seek a long-term sustainable financing solution together in the coming months,” said the company’s director Toni Balažič in an interview with the business newspaper Finance on Wednesday.

“We are looking for the best solution so that Mercator can normally meet its obligations from current operations, which needs to align with the banks’ desire for Mercator to reduce its debt to a more sustainable level as soon as possible,” Balažič stated.

He added that the company plans to implement minor layoffs this year and next, but not in stores, rather in administrative services, and through various measures intends to save 80 million euros by 2016 to optimize operations.

According to the unaudited business results published by Mercator on Tuesday, the largest Slovenian retail company with 24,000 employees, half of whom are in Slovenia and half in several Southeast European countries, recorded a loss of 103.6 million euros in 2012, with only a quarter of the loss stemming from operations, while the rest consists of one-time write-offs resulting from asset revaluation that did not affect cash flow. At the group level, Mercator generated 2.87 billion euros in revenue in 2012, which is on par with the previous year. Despite this, the new management under Balažič, appointed last year, plans restructuring and optimization, focusing on core activities. This would increase its attractiveness to customers as competition from discount chains such as Hofer and Lidl increasingly threatens it in the Slovenian market amid declining consumption.