Peruško: Creditors Will Manage the Agrokor Group Through a Holding in Zagreb

Creditors will take control of the new Agrokor group through three legal entities based in the Netherlands, while operational management will be carried out by a holding company based in Croatia, reported the extraordinary commissioner for Agrokor, Fabris Peruško, on Tuesday.

Creditors have opted for an “ownership structure” in the Netherlands, as the method of settlement provided for Agrokor in that country has a rich legal practice.

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“Operational management will be carried out by a Croatian holding company based in Zagreb. Its operational functioning will be local here and it will have operational and ownership structure over all companies in the Agrokor system, both those in Croatia and outside Croatia,” said Peruško.

The future ownership structure will maintain the group’s past crediting, he explained.

Peruško did not want to provide more detailed information about possible shares in the new ownership structure, reiterating that work is still ongoing on the EPM model and that the exact relationships will be known in about a month.

He ruled out the possibility of Ivica Todorić returning to the ownership structure, emphasizing that the debts he left are significantly greater than the assets of the group.

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Regarding the border debt (which arose before the opening of the extraordinary administration procedure and became due after April 10, 2017), he said that its collection will also depend on the future operations of Konzum. Namely, suppliers are given the opportunity to collect an additional 80 million euros of border debt across all companies in the system, and that payment depends on whether Konzum achieves results defined by the sustainability plan, as most of the debt relates to Konzum, so payment depends on how it will operate in the next four years.

“I believe this will allow suppliers to reduce their write-offs to the greatest extent possible,” he said.

Agrokor’s creditors have initialed a framework agreement on the settlement, and as announced by the group, the agreed key elements include the corporate structure of the new Agrokor Group, the treatment and form of settlement of claims of creditors arising before the opening of the extraordinary administration procedure, the new debt of the new Agrokor Group and its capital structure, a special agreement with suppliers on the settlement of the so-called border debt, and the implementation of the settlement.

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Structure of the new group

The new companies that will form the management holding structure are STAK, NizTopCo, NizHoldCo, and HoldCo.

STAK is the company through which existing creditors take control of the new group, and it is a special form of legal entity in the form of a foundation in the Netherlands, which will be the formal owner of the entire new group.

NizTopCo is the future parent company, and it is a Dutch limited liability company. STAK will issue depositary receipts of ownership for the shares it holds in NizTopCo to creditors, and the management rights in it will be exercised by creditors through giving instructions to STAK.

NizTopCo will own NizHoldCo – a Dutch holding company, with limited liability, which will be the direct parent company of the new Croatian holding company – HrvHoldCo. The latter company will be the parent and holding company for all operational companies. The new operational companies will be limited liability companies and directly owned by HrvHoldCo, and they will, as mirror companies, take over all assets of existing insolvent companies without simultaneously taking over old obligations.

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The purpose of this, it was explained, is to ensure the continuation of the business of these companies after the settlement without inherited obligations, whereby existing external shareholders/members of the Agrokor group, encumbrances on shares, and repo claims are removed, and there are no more mutual guarantees.

Shares of the Agrokor group in existing companies, which are solvent companies, i.e., those for which it has been determined that their assets exceed their obligations, as well as companies based outside Croatia, are also transferred to HrvHoldCo, and this transfer will not affect their minority and majority shareholders and creditors.

The future group’s operations rely on the so-called arms-length principle regarding relationships among companies within the Group, which means that the parties in mutual relationships are equal and independent, it is stated in the announcement.

It has been specifically determined that the main criterion for determining the amount of settlement of individual claims is the EPM methodology, which is used in the largest international corporate restructuring procedures.

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Among other things, it was agreed that HrvHoldCo will enter into new financing that will fully refinance the existing priority loan in the amount of 1.06 billion euros, and the terms of that loan still need to be determined.

Also, an agreement has been reached with suppliers regarding the payment of border debt, i.e., debt that arose before the extraordinary administration procedure. This debt remains unpaid from 130 to 160 million euros, and it has been agreed that a maximum of 80 million euros can be paid, and that annually during 2018, 2019, 2020, and 2021, it was emphasized.

Among other things, it was agreed that the retail operational companies of the new group will retain qualified creditors as suppliers for five years from the conclusion of the settlement with the agreed representation of their products on their shelves.

It was also noted that all employees will be transferred to the new group.

In the first two months, Retail and Wholesale with negative EBITDA

According to preliminary and unaudited data from the Report on the Implementation of the Extraordinary Administration Procedure in Agrokor for the period until April 10, 2018, which the Government received today, it is evident that Agrokor’s business group Retail and Wholesale, which includes Konzum Croatia, Tisak, Konzum BiH, and Velpro, operated with 1.78 billion kuna in revenue in the first two months of this year, with a negative EBITDA (earnings before interest, taxes, and depreciation) of 44.9 million kuna.

At the same time, Food, which includes Jamnica, Roto dinamic, Sarajevski kiseljak, Ledo, Frikom, Ledo Čitluk, Zvijezdu, Dijamant, and PIK Vrbovec, achieved 853 million kuna in revenue and an EBITDA of 48.5 million kuna, while Agriculture, which includes Belje, PIK Vinkovci, and Vupik, had revenues of 270 million kuna and an EBITDA of 17.1 million kuna.