Croatian Agrokor roll-up loan refinancing approved

The temporary creditors’ council of the former Agrokor conglomerate on Wednesday voted for refinancing a roll-up loan with three votes from representatives of financial creditors, while suppliers’ two representatives voted against, Fortenova Group CEO Fabris Perusko said in a press release. He noted that since the decision was supported by the majority, the management will continue doing what is still necessary to finish refinancing the roll-up loan with a bond on Friday. The Fortenova Group will refinance the June 2017 roll-up loan by issuing a 4-year bond in the amount of EUR1.2bn at 7.3% interest plus EURIBOR. The new financing is to be led by the US investment fund HPS Investment Partners with the participation of Russia’s second largest bank VTB Bank that holds 7.5% stake in the Fortenova Group. The EUR1.06bn roll-up loan was taken to cover the debts of the former Agrokor food and retail chain. According to previous information, the roll-up loan had an interest rate of 11.5%, which was expected to grow to 14% by September, while the effective interest rate could reach even 18%. Russian bank Sberbank, formerly the biggest creditor of Agrokor, became the biggest single shareholder with a 39.2%-stake. Bondholders hold 25% in Fortenova and local Croatian banks 15.3%.

Perushko also underlined that the vote had absolutely nothing to do with the conditional payment of suppliers and that he was sorry that some supplier representatives put their own interest before the interests of every other stakeholder in this process. According to him, the group has raised its offer for border debt payments this year to EUR9m after the initial offer of EUR5m was turned down. He recalled that the group had put the border debt at EUR17.5m and that the debt settlement agreement in no way envisages the pace of its payment, adding that the latter is subject to agreement based on payment possibilities. The suppliers did not back the refinancing model as they believe it would undermine their settlement rights. Maria Vidakovic, who represented the large suppliers, said that the interest rate on the financing of the roll-up loan was too high given the collateral and the fact that nowadays companies could be financed with 1% interest. Vidakovic also announced that suppliers would take legal action so that the settlement reached for the former conglomerate is honored, adding that no agreement had been reached with Fortenova Group on the payment of the border debt – they wanted Fortenova to pay suppliers at least 50% of their claims each year or up to EUR10m per year, and that this was why suppliers were against refinancing a roll-up loan. Vidakovic said that suppliers had pushed for reaching a compromise on the pace of the repayment of Agrokor’s border debt but that the Fortenova Group leaders were not willing to reach an agreement. She said suppliers could not support new borrowing as a contract with new creditors contained a border debt repayment clause, limiting it to EUR15m over four years, that was contrary to the settlement. Note that the border debt totals EUR70m and was incurred over two months prior to an emergency administration entering Agrokor. Under the settlement, the repayment is to be carried out over four years if the Konzum retail chain’s EBITDA exceeds EUR38.8m. Given Kozum’s results last year, suppliers expected the payment of EUR17.5m.

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