Ahead of Russia and Croatia meeting in the World Cup, Russian banks have been key players in a debt restructuring deal intended to ensure the survival of Agrokor, the Croatian food producers and retailer which is the largest private company in the Balkans. The Zagreb vote will see the company placed into the hands of creditors, after a transition period, Reuters reports.
Russian state-controlled banks held about a quarter of the company’s debt, with Agrokor owing approximately EUR €1.1 bn to Sberbank and about EUR €300 mln to VTB. This made them instrumental in the creditors vote called after the Akgrokor went into administration in April 2017. The fate of the Croatian company had been in doubt in the wake of a failed expansion drive which had resulted in more than $5bln in debt.
The restructuring will see Sberbank become Agrokor’s largest stakeholder with a 39 percent holding, and VTB will controlling a further 7 percent. The plan is subject to court approval, after the Croatian government passed a special law to support Agrokor, to avoid tipping the nation into recession. Employing more than 60 thousand people across the Balkans, Agrokor had posted 2017 non-consolidated revenues of 43.4 billion kuna ($7.07 billion) a fall of 10% year on year, accompanying an 8% year on year rise in EBITDA to 1.84 billion kuna, in April, in the wake of debt scandal which had seen both S&P and Moody’s warn about the company’s viability under its debt load in early 2017.
Sberbank welcomed the creditors’ decision with Vedomosti reporting VTB also voted for the restructuring and change of management with a VTB spokesman adding “We are interested in the company boosting its capitalization and repaying debt”.
Agrokor’s preliminary value is estimated at EUR €1.8–3.8 bn, according to a restructuring presentation published in March 2018. Deloitte partner Yegor Metyolkin, says that the Russian state banks will be primarily focused on returning Agrokor’s operations to a sound basis and then finding investors with a retail focus. He added that retail is a non-core business for Sberbank, and that it would be likely that it would seek to sell down its stake over time as the financial footing of the Croatian company was repaired, adding that “Big players operating in multiple regional markets and often dominating in certain countries are usually well positioned to win competition”, and the possibility that larger European chains could be interested in Agrokor going forward.
Fitch analysts, Dmitry Vasiliev, added that Agrokors debt to Sberbank is unlikely to significantly impact on the Sberbank 2018 results, noting “Agrokor’s debt to Sberbank was already well provisioned last year and it will have no significant impact on the profit or capital.”
Russia and Croatia will meet in the FIFA World Cup quarter finals on 7 July in Sochi, Russia.