New Shareholder Agreement Between the State and Orco Group for Sunčani Hvar?

The Croatian state and the Luxembourg-based Orco Property Group will seek a solution in the coming months to stabilize the hotel company Sunčani Hvar and define future cooperation through a new shareholder agreement for the benefit of joint investments in this Hvar company.

This is stated, among other things, in a release published by Orco Group on its website, dated at the end of last week, which states that representatives of the Croatian state and Orco Group reached such a framework agreement or ‘roadmap’ for the financial and operational recovery of Sunčani Hvar on July 9 of this year.

Accordingly, the parties will mutually suspend or halt the arbitration proceedings they are conducting and finally terminate it when they define solutions for stabilizing Sunčani Hvar and improving mutual connectivity.

This is expected to take place in the coming months, including agreeing and formalizing a new shareholder agreement, which was also confirmed in the release by Orco’s President and CEO Jean-Francois Ott, emphasizing that the new agreement is an important step towards the permanent financial and operational recovery of Sunčani Hvar.

He also thanked representatives of the Croatian state who, he says, have worked diligently with him over the past few weeks to draft the plan. Ott emphasizes that with the suspension of the arbitration proceedings, they can now focus on the summer season and providing services to guests of Sunčani Hvar.

Nothing could be learned today from state institutions regarding all of this, with the Agency for Management of State Property (AUDIO) only briefly stating that they ‘do not wish to comment while the proceedings are ongoing.’

The latest agreement between the state and Orco, which is currently only confirmed by Orco’s announcement, is actually not unusual as the state and Orco have had similar agreements, more or less unsuccessful, almost every year or two since 2005 when Orco entered the ownership structure of Sunčani Hvar.

Initially, it was a five-year agreement, until 2010, which was terminated that year by the former HFP, as Orco did not fulfill its financial and development plans in Sunčani Hvar.

That year, arbitration was initiated due to mutual lawsuits, and in 2011, a relatively successful restructuring of Sunčani Hvar’s loans was agreed with banks, as well as a reduction of share capital at the Assembly, all to reduce the accumulated losses of the company and recover the balance sheet.

However, despite all agreements, which also involved the city of Hvar, the Church, and minority shareholders due to unresolved property relations, Sunčani Hvar recorded losses every year, at one point its account was blocked in the middle of the summer season, workers were laid off and protested, and tourist occupancy was below expectations.

Nevertheless, 2011 was also the first business year that Sunčani Hvar ended without a loss, with a profit of nearly one million kuna, and since then, physical occupancy has improved, but only in the summer months.

For 2012, there is no business data available, which is why the Zagreb Stock Exchange, where Sunčani Hvar’s shares are listed, issued a public warning to the company, but the data has not yet been published.

The main shareholders of Sunčani Hvar, according to today’s data from the SKDD website, are Orco Group with a share of 56.55 percent and AUDIO or the state with a share of 32.36 percent.