Croatian Fortenova Group suppliers oppose new roll-up loan refinancing model

The association of suppliers of Fortenova Group, the successor to the Agrokor food and retail conglomerate, decided that they would not back the planned by the group new refinancing model of the expensive roll-up loan if Fortenova’s management does not secure that their rights would not diminish after the deal, local Jutarnji List daily reported. Marica Vidakovic, a procurator of Kras and a representative of suppliers in the provisional council of Creditors of Fortenova Group, commented that the new refinancing model, which includes the main creditors of Agrokor, creates preconditions for the suppliers not to receive a portion of the marginal debt totalling EUR80m this and in next years, adding that this year they should have been paid EUR17.5m. Vidakovic pointed out that the new provisions decided that suppliers could receive up to EUR5m a year. Recall however that the debt settlement agreement provided that the company should pay suppliers 6% interest rate on each delay of the repayment of the marginal debt. At the same time, as suppliers have two representatives at the provisional council of creditors, while financial creditors, who approve it – three, the roll-up refinancing model is likely to be approved as the suppliers do not have the necessary majority. Jutarnji notes that according to unofficial information, the share of the Russian VTB bank in this financing is EUR400m, confirming previous information that these institutions will refinance the roll-up loan.

The Fortenova Group officially started its business operations on Apr 1, taking over the Agrokor conglomerate’s business. Russian bank Sberbank, formerly the biggest creditor of Agrokor, became the biggest single shareholder with a 39.2%-stake. Bondholders hold 25% in Fortenova, local Croatian banks 15.3% and Russia’s second largest bank VTB holds a 7.5%-stake. Recall that in late-July Fortenova announced that over 80% of holders of depositary receipts had voted in favour of new financing led by the US investment fund HPS Investment Partners with the participation of VTB Bank. The new financing arrangement is aimed to refinance the Super-Priority Term Facilities Agreement of Jun 8, 2017, namely EUR1.06bn roll-up loan taken to settle Agrokor’s debts that currently has an interest rate of 11.5%, but which is expected to grow to 14% by September, while the effective interest rate could reach even 18%. The new financing is structured as a 4-year bond of up to EUR1.2bn with an interest rate of 7.3%, plus EURIBOR with a floor of 1%, and is led by HPS Investment Partners. The refinancing process is expected to be completed by the end of August.

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