Russian banks are key to Agrokor's future, analyst says

NEWS 12.04.201809:47
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Without reaching an agreement with Russian banks, analysts say, any debt settlement required for the restructuring of the indebted food and retail conglomerate Agrokor would not be possible. In addition, getting a deal that all debtors, suppliers and shareholders would be happy with simply cannot be achieved.

“A deal could have happened much sooner, because Sberbank’s involvement was key to the whole process. They are the biggest single creditor, and they very easily came to an agreement with other large creditors,” Novotny said.

An outcome in which Agrokor’s property will be transferred to a newly established “twin” company is similar to the scenario already used in Slovenia when the Nova Ljubljanska Banka (NLB) was formed in the 1990s, economist Damir Novotny in an interview with Tportal on Tuesday.

“This (restructuring) model was used before in the case of Ljubljanska Banka. Back then, they passed a special law in Slovenia on that bank, which had subsidiaries all over the region. And only its assets – but not its debts – were transferred to the newly established bank,” Novotny added.

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Ljubljanska Banka was a large state-owned Slovenian bank with subsidiaries across Yugoslavia which collapsed in the early 1990s. Via a special law, its assets were transferred to a new state-owned NLB which was established in 1994, but without NLB inheriting any of its financial obligations. This then led to lengthy legal battles with bank’s depositors outside of Slovenia who had lost their savings in the bank collapse, and the issue grew into a decades-long strain on Croatia-Slovenia relations.

Novotny said the settlement could have been agreed earlier, and added that it remained unclear why the former state-appointed crisis manager, Ante Ramljak, prolonged the process.

“Obviously, Ramljak was the one delaying the process, the person who pulled the brake for no apparent reason. His motives are unclear to everyone but himself, and now we have a situation in which we have two large groups of debtors – the Russian banks Sberbank and VTB, and the Knighthead hedge fund, which will control the destiny of the company from July 10 onwards,” Novotny added.
Ramljak was the state-appointed crisis manager of Agrokor until February this year, when he resigned amid allegations of conflict of interest due to his decision to hire his former consulting firm as one of his advisors for the restructuring of Agrokor. He was replaced by Fabris Peruško, and under Peruško Agrokor’s single biggest creditor Sberbank – which holds a €1.1 billion claim – returned to the negotiating table, in exchange for abandoning lawsuits against Agrokor in several European countries they had launched during Ramljak’s tenure.
According to Novotny, the two banks and the American hedge fund will be the main factors in deciding on the future of the company, which the government will no longer have anything to do.
As for major Croatian food companies Adris and Franck, who did not attend the settlement signing, Novotny said it was likely they would have to take shares in the new Agrokor company, but would be forced to write off at least two thirds of their debt claims.

Although the settlement framework envisions exchanging debt for equity in the “new” Agrokor company, it is still unclear how the shares would be divided up among individual creditors.

But according to media speculations, Russian banks Sberbank and VTB are likely to get around 43-45 percent in the new company, bond holders led by Knighthead fund could get around 23-25 percent (including 12 percent for Knighthead itself), Croatian banks would get some 10 percent, and all suppliers (including Adris and Franck) about 8 percent of the stake in the new Agrokor, Tportal reported.