The European Commission on Wednesday approved Croatia's plans to grant mechanical engineering company Djuro Djakovic restructuring aid for a total amount of €57.4 million.
The measure will enable the company to finance its restructuring plan and restore its long-term viability with the support of a private investor, the consortium of Czech companies DD Acquisition, the Commission said.
On 8 May 2020, the Commission approved rescue aid to Djuro Djakovic in the form of a Croatian state guarantee on a €40.31 million loan. The guarantee allowed the company to meet urgent liquidity needs and continue its activities, while limiting distortions to competition until approval of the restructuring plan. At the time, Croatia committed to submit a restructuring plan for Djuro Djakovic within six months following the first disbursement of the guaranteed funds.
Croatia submitted a restructuring plan and notified the Commission of its plans to grant restructuring aid to the company. The planned restructuring aid will take the form of a debt to equity swap and a guarantee on potential future commercial claims for a total amount of €57.4 million. The restructuring plan provides that a private investor, i.e. the consortium of Czech companies active in the same sector, “DD Acquisition”, will participate in a share capital increase with cash and in-kind contributions of approximately €64 million.
Following the capital increase, the new investor will become the controlling shareholder of Djuro Djakovic and will support various aspects of its restructuring with cash and synergies, and contribute its experience and market knowledge.
The Commission found that the aid is necessary to ensure that Djuro Djakovic will be viable long-term without the need of continued public support. This will also be ensured by the acquisition of control of the company by a private investor with core-activities in the same industry.
The Commission also found that the aid is appropriate, as it supports a comprehensive restructuring plan running until the end of 2023, and proportionate, with an own contribution of over 50% of the restructuring costs provided by the company and the investor at market terms.
Compensatory measures, in particular the withdrawal of the company from the project engineering market through the liquidation of the subsidiary Djuro Djakovic Industrial Solutions and the discontinuation of the production of three types of wagons, are provided to limit potential distortions of competition on the market for freight wagons where the company operates.
Djuro Djakovic employs 733 people and has a diversified industrial portfolio including defence, transport, industry and energy. The core business of the company at present is the manufacture of freight wagons for special purposes. Djuro Djakovic is located in the eastern part of Continental Croatia, which is an assisted region with high and persistent unemployment and low levels of job creation. Djuro Djakovic has been facing difficulties due to internal and external factors, including cutbacks by Croatia of its military spending in the last years, the Commission said.
