Nenad Bakić sold Varteks’s debt exceeding 42 million kuna

Nenad Bakić announced on his Facebook profile that he has sold his claims against Varteks. In 2014, he became the owner of more than 15 percent of Varteks shares and in 2018, he recapitalized the company with around 20 million kuna. A year later, he also became the CEO of Varteks.

After Bakić signed a contract with Meta Nekretnine yesterday and transferred his claims against Varteks to them, he confirmed this on his FB profile today, amounting to more than 42 million kuna.

We are transmitting his status in full.

– On Friday, I sold my claims against Varteks, in which I am a minority shareholder, to a company that will professionally try to collect them. Unfortunately, due to the inability of other creditors to agree on how much of the necessary transactions will belong to whom – I have always removed the security of my claims and did not take a single kuna – I do not see how I can be useful in that sense.

Since Varteks is listed on the Stock Exchange, and although I have not been a member of the Supervisory Board for some time, I cannot tell you everything I would like through this channel, but I hope this will be enough – all material information is publicly available.

In 2018, through recapitalization, after potential partners withdrew, I invested the necessary – and at that time seemed – sufficient funds to turn around this company of magnificent tradition.

Unfortunately, the situation was far more difficult than it was presented and it was not enough, and since then I have (interest-free) lent significant amounts (around fifty million kuna) to finance salaries and production, in order to make a turnaround, which I believe no one in Croatia has done in such situations.

Varteks made a strong turnaround in 2019, with a complete revival of the brand, including top quality, with retail revenue growth of an incredible 70%, and an extremely positive dynamic that you remember.

Nevertheless, Varteks is a highly indebted company, with losses of nearly a billion kuna (!) during the terms of previous managements and sold off its most valuable assets, so at times I did not believe we would succeed because financial institutions were mercilessly tightening the noose, and there were no partners. Those who told me (as the then county prefect) were right when they said ‘You don’t even know what you’ve gotten into, you have no chance of succeeding!’. When we organized the celebration of the company’s 100th anniversary at MSU at the end of 2019, the only thing I hoped for was that we would not go bankrupt before that, so we could show what was possible. Namely, at that time in the middle of the year, I stopped injecting new funds because it was completely hopeless as the banks were waiting to extract money and actually take it from the workers’ mouths (I think it was precisely then that HBOR and Zagrebačka banka canceled the first part of the loan for working capital for exports). The workers did not know this and were proud that someone was finally treating them as human beings and giving them faith in the future and optimism (as seen in the Christmas celebration video from 2019).

However, those were the darkest moments and before the corona crisis we practically saved the company.

Of course, the fashion and textile industries were particularly affected by the crisis. Varteks is a fashion company by business model but primarily a textile company by the number of employees.

The cancellation of orders from abroad (mostly BOSS) left the majority of workers in the plant without jobs, but we decided not to lay off, to preserve those jobs and livelihoods. The situation in the Croatian market was bad, but bearable (although it would have been better if a lockdown had been declared in the fall of 2020, and companies received compensation), and the company hoped to be able to repay debts and carry out restructuring through activating inactive assets, in a very complicated situation that nevertheless started to go in the right direction.

Some of the largest textile companies in Croatia are shutting down operations and laying off all workers. All of us who were involved in management during the crisis are proud that we managed to preserve all those jobs during the crisis – state compensation covered only a small part of that.

The key to continuing the turnaround lies in resolving excess assets that financially burden the company, the neglected factory complex, which was quite difficult, as it is not some complex in Zagreb. For example, only the building on Trg bana Josipa Jelačića, which was delivered to the banks in the previous phase, is worth more than the entire complex in Varaždin, and that is just one of about a hundred scattered properties, which is also the subject of some criminal proceedings – but it should have been enough.

‘Coincidentally’, urban planning plans for the area of that complex in Varaždin had not been adopted, I believe due to the real estate ambitions of previous managements, so as early as 2019, Varteks was advised to – in order to avoid possible extortion by local politics – embark on a so-called ‘Strategic project’, which is actually nothing more than defining where and what kind of communal infrastructure will be, and it allowed the new local government to start issuing some permits. It is very sad that this instrument was twisted by various people who wanted to settle scores with me for other reasons as ‘the state is giving Bakić xxx million’ (first of all, the party is not ‘Bakić’, but Varteks, secondly – it is not giving anything), presented at critical moments, and they tried to bring down a company with 1000 employees in such times to take revenge on me.

As I said, the sale of encumbered properties began to happen, but at a slower pace than it could have – leading to further accumulation of losses – primarily due to severe bank obstructions (I will soon publish some emails). And every time a payment for some property was due, greedy and brutal banks insisted on significant collection, instead of leaving more to the company and even collecting more securely later. I always removed my securities from the properties and did not ask for a single kuna, even though I was the largest creditor.

The role of the Croatian Bank for Reconstruction and Development (HBOR) is particularly interesting, which, while I was injecting money for salaries, greedily collected the second part of the export loan at the first influx of money ‘because their security was slightly reduced’ at the moment of the worst crisis. All of this was in contrast to, admittedly verbal, agreements with the holder of the club loan Zagrebačka banka that it would be collected proportionally to the ‘coverage factor’. Although ZB, which was thus in the same club loan, said that Varteks could keep the money.

Varteks is probably the only company for which HBOR insisted on the repayment of overdue debt in the middle of the crisis – perhaps even in the EU regarding similar banks – and it was still about an export loan. Instead of supporting the company. For the windmills that we all pay for, there was money. Interestingly, the first company in Italy to receive crisis aid (and that through capital investment) was Corneliani, a prestigious fashion house, due to its ‘significance for culture and tradition’. Although the relationship with commercial banks was better (and one even helped us, although that was a drop in the ocean), you know how it looks when you have to beg a foreigner, a member of the board of a foreign bank who stumbles through bad English, over Zoom not to turn you down, ‘because that can happen’.

We did not beg for money from the state/HBOR, but we expected not to have a knife stabbed in our backs. And in relations with banks, it did not help at all that it was precisely my investments and the efforts of management and workers that managed to save the remaining investments of banks and taxpayers, which had previously been recklessly given, although they had already nicely collected a large part of those claims with nice interest before that.

I thought it should be in all our interests to preserve those jobs, as well as the tradition of the Croatian textile and fashion industry. But that’s how it is, how it is – I really turned out to be an idiot? for trying such a difficult project. For me, the period when I led the company as interim CEO was perhaps the hardest year of my life. Otherwise, I worked for minimum wage because I felt it was not right to have a higher salary while there were workers working for minimum wage.

As I said, the company is listed on the Stock Exchange so I cannot say too much, but from publicly available information, it is clear that there are negotiations among creditors, as well as that the announced key transactions are pending, and that they are critical. I hope that the creditors will agree on something (because I was never a problem, I always renounced securities, interest, collections…) because the company definitely has potential.

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