Croatian government approves guarantees on EUR260m debt of road companies

The government approved in its session on Thursday state guarantees on loans worth EUR 260mn to two state road companies, HC and HAC. Most of the funds, namely EUR200m, will be used by the motorway operator HAC, which has to repay total of EUR633m. The government has planned HAC to take new debts worth EUR546.9m this year, transport minister Oleg Butkovic said. As for roads company HC, the EUR60m in funds will be used mainly for refinancing debt but a small chunk will be also used for investment. HC will raise debts of HRK 1.6bn this year, to refinance older debts but also for financing. The company has to repay HRK1.7bn this year.

The three big road companies HC, HAC and ARZ have piled up EUR5.2bn in debts, which is about 10% of GDP, due to heavy expansion and modernization of the road infrastructure in the past 20 years. All debts are guaranteed by the state and the companies cannot service their debts without government guarantees. Total of EUR1.2bn should be repaid this year and the rest, in the following 5-7 years. The companies also have governance, efficiency and transparency issues. The government is working on the restructuring of the sector in cooperation with the WB. It approved a month ago the restructuring, which provides for merger of state road companies, cutting employees’ number, and seasonal increase in tolls.

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