The process of reaching a settlement under the extraordinary administration procedure of Agrokor is one of the most complex in Croatia and in Europe due to the complexities of Agrokor as a business and the total amount of the debt as well as the large number of creditors, 5.700 of them. This section contains all the news on the process of reaching of a settlement for all the key stakeholders, as well as the latest details and developments.

Extraordinary Commissioner’s Address to the Board of Economy of the Croatian Parliament

Dear Deputy Prime Minister, dear President of the Board, dear Members of Parliament, Ladies and Gentlemen,


Exactly seven weeks ago the Commercial Court in Zagreb appointed my colleague Irena Weber and myself as Extraordinary Commissioner and Deputy.

Over the course of these seven weeks it has been our first and foremost goal to sign the settlement document whereby the creditors would in principle agree on all the key elements and aspects of the settlement. We have also agreed for Sberbank to join the process as well as the model of repaying border debt to suppliers.

As you may know, in the period preceding the appointment of the new Extraordinary Administration the settlement negotiations among the creditors had come to a halt.

This is why my colleague Weber and I, with the support and help of Deputy Prime  Minister Mrs. Dalić, have focused all our efforts on establishing an open, intensive and constructive dialogue between the creditors’ representatives. This resulted in signing the in-principle agreement (term sheet) between the creditors, outlining the key elements of the settlement, on April 10 this year.

In the meantime we requested from the Commercial Court to extend the duration of the extraordinary administration procedure by the statutory envisaged three months, which has been approved. Furthermore, immediately after having signed the term sheet with the creditors, we continued working on setting forth the final wording of the settlement agreement, based on the claims filed and their legal status.

Kindly allow us, by way of introduction, to briefly present the term sheet signed on behalf of the creditors on April 10 by all members of the Temporary Creditors’ Council, as well as by the Suppliers’ Association and VTB.


The agreed key elements of the term sheet comprise:

  • The corporate structure of the new Agrokor Group;
  • The treatment and form of recovery of pre-petition creditors’ claims;
  • The new debt of the new Agrokor Group and its capital structure;
  • The special arrangement with suppliers regarding recovery of the so-called border debt and
  • The settlement implementation.


The operations of the future Group shall rely on the so-called arm’s length principle in terms of intercompany relations, meaning that the parties are equal and independent in their mutual relationships.

Furthermore, in order to minimize the likelihood of a systemic risk to occur again going forward, it is expected that there will be no mutual indebtedness between the operating companies, while indebtedness between the operating companies and the holding company is only envisaged to take place in a very limited scope necessary to optimize the capital structure.

It has been established that the main criterion for determining individual claim recoveries is the Entity Priority Model (EPM), which has been developed by international institutions and used in the largest international restructurings of corporations as complex as this.

According to the term sheet with the key elements of the settlement, the settlement shall, amongst others, pertain to eight key elements.

Allow me to briefly run you through each one of them.

A) Corporate Structure of the New Agrokor Group

The new companies constituting the new holding structure are companies which are for the purpose of the term sheet called STAK, NizTopCo, NizHoldCo and HrvHoldCo.

The parent company of all subsidiary and affiliated companies of the new Agrokor Group (New Group) will be HrvHoldCo, a joint stock company seated in Croatia. Creditors have decided that the new holding structure will be based in the Netherlands.

This decision of the creditors was determined by the fact that the majority of claims owed to Agrokor Group creditors are held by companies in foreign ownership, ie. international financial institutions.

It is worth reiterating that the parent company of all subsidiary and affiliated companies of the new Agrokor Group will be a joint stock company based in Croatia.

The new companies constituting the operating structure shall be established as limited liability companies directly owned by the Croatian holding company. As mirror companies, they will take over the businesses of those existing companies which were found to have liabilities exceeding the value of their assets, ie. to be insolvent.

The new company shall secure for the operations to continue post-settlement,  without the inherited liabilites, ie. known and unknown pre-petition claims.

The new company shall also make sure for the old structure to be separated from the new one, in line with the settlement agreement.

Existing companies constituting the operating structure are companies with assets exceeding their liabilities. Those are solvent companies and foreign companies not subject to the extraordinary administration procedure. The interests, ie. shares of the Agrokor Group in these companies will be transferred to the Croatian holding company, with no impact on the minority and majority shareholders or members of the company nor on the creditors of any of such subsidiaries.


B) Treatment of Creditors with Pre-petition Claims

With regards to unsecured claims, such creditors will receive recoveries by taking over ownership stakes in the New Group in the form of two instruments, the first one being depositary certificates of ownership issued by STAK, and the second being a new claim against the New Group, i.e. a convertible bond issued by NizTopCo. These instruments will be mutually linked in such way that it will not be possible to dispose of them separately.

The amount of recovery in the form of depositary certificates and bonds will be established pursuant to the EPM methodology which calculates the rate of recovery separately by each individual company subject to the extraordinary administration.

Each creditor will receive an equal ratio of depositary certificates and bonds. For creditors with very low amounts of claims, as an exception to the model of receiving ownership stakes and bonds, the option is being considered to pay them the established amount of their respective recovery in cash at a certain discount.

For claims secured by entitlement to recovery from the value of specific assets – liens, which are not those claims secured by third persons’ guarantees, the recovery depends on the amount of coverage of the claim by the value of the pledged item.

Creditors shall receive recoveries by taking over new claims against the New Group in the same nominal value as their old claims, to the extent covered by the value of the pledge. The part which is not covered by the value of the pledge shall be recovered in the same way as the claims of unsecured creditors and subject to the same amount of reduction, ie. write-off.

For all claims covered by the pledge value a unique maturity shall be established as well as an interest not exceeding the market rate. The pledge used as security for the old claim will be transferred as security to the new claim as well.


C) Debt Structure of the New Group

Apart from the aforementioned debt from claims covered by pledge, the New Company shall have another two forms of indebtedness.

For the purpose of addressing the status of the existing Super-Priority Term Facilities Agreement (SPFA) in the amount of up to EUR 1.06bn concluded by Agrokor in June 2017, the Croatian holding company will enter a new credit arrangement to fully refinance the SPFA. The terms of such loan are still to be agreed and this is something we are currently working on.

In terms of financing the operating companies the envisaged possibility is to finance their operating costs by way of revolving credits to bridge the liquidity needs given the seasonal character of their operations.

It is important to note that no mutual financing is planned between the operating companies as in the current Agrokor Group, other than directly between the Croatian holding company and individual operating companies.

D) Capital Structure of the New Group

As explained earlier, the claims with which creditors participate in the extraordinary administration procedure shall by way of recovery be replaced by a combination of ownership and debt instruments.

Allocations of ownership and debt instruments shall be determined based on the Entity Priority Model.

Each creditor shall at the same time receive partly ownership and partly debt instruments which will be linked in such way that they cannot be disposed of separately.

The disposal of ownership and debt instruments will be made possible provided that it takes place on the private market and that they are disposed of together.

Creditors shall influence the managing of the New Group by appointing the Management Board and by limiting their activities.

With regards to corporate governance, the depositary certificates shall provide the creditors with the following specific entitlements: the right to be informed, the right to participate in decision-making by giving consent for certain specific decisions (material asset disposals, taking debt, granting loans, appointing directors, changes to corporate documents etc.) and the right to participate in profits.


E) Special Arrangement with Suppliers

This arrangement is related to the issue of further payments of the so-called border debt. The border debt is pre-petition debt to the payment of which Art. 40, item 3 of the Extraordinary Administration Act may apply.

Pursuant to the special arrangement, border debt which may be subject to payment is a border debt which any Agrokor Group member owes to an eligible creditor – a creditor whose claims have been determined in the procedure – and which is divided in A, B and C claims.

The highest total amount of border debt which may be paid for A, B and C claims is EUR 80m.

A claims pertain to border debt owed to eligible creditors who have not later than April 5, 2018 concluded a business cooperation agreement to keep the historic commercial conditions. B claims pertain to border claims to be determined separately. C claims are all those claims which are neither A nor B, but qualify as border claims.

By way of the special arrangement it has been agreed that creditors hold a conditional right to receive payment of the remaining part of the border debt. The payment obligation shall be established at the NizHoldCo to the benefit of the Payment Agent, to be established by eligible suppliers.

Eligible suppliers are entitled to exercise the right to an annual border debt payment over the period of the years 2018, 2019, 2020 and 2021, provided that Konzum has generated a certain result in the relevant calendar year. The amount that can be paid against the border debt for each calendar year corresponds to the amount by which the EBITDA, ie. operating profits generated in each individual calendar year exceed the minimum agreed EBITDA in such calendar year of EUR 38.8m. The total amount of all annual payments cannot exceed EUR 80m. The EBITDA definition to be taken into account in establishing the result of Konzum has been explicitly and specifically agreed.

The payment for each calendar year will be made within 30 working days as of publication of the audited financial statements of the New Konzum for the respective calendar year.

The obligation of border debt payments shall cease upon expiry of the four-year period, irrespective of the amount of border debt which shall finally be paid.

Until expiry of the period of possible border debt payments the appropriate recovery instrument shall be held by the supplier’s Payment Agent. Upon expiry of the aforesaid deadline, eligible creditors will receive the appropriate amount of recovery for the part of the border debt which has not been paid in cash, in the form of depositary certificates and bonds.

The allocation of eligible creditors’ recoveries as per settlement agreement in the form of depositary certificates and bonds which is related to border debt subject to the special arrangement shall either be re-allocated to cash payment or such part of the border debt which has not been paid in cash shall be recovered as any other unsecured debt, pursuant to the settlement agreement.

Also, to the extent permitted by the law, the retail operating companies of the New Group shall keep eligible creditors as suppliers for five years as of closing the settlement, with the share of eligible creditors’ products on the shelves of these retail operations reflecting the share of such creditors’ products on the regional markets.

It is important to note that the retail operating companies shall treat all suppliers at equal market conditions, irrespective of whether they are members of the New Group or third parties.

In terms of the support provided by eligible creditors – suppliers to the extraordinary administration procedure and the settlement, it has been agreed that representatives of small and large suppliers in both the Temporary and the Permanent Creditors’ Council would support the settlement, the pertaining decisions and transactions related to the realization of the settlement. It has also been agreed that the Management Board of the Suppliers’ Association would support the process and the settlement and that the suppliers would raise no further commercial requests.


F) Depositary Holding Recovery Instruments Related to Contested Claims

In cases where certain creditors’ claims have been contested and the court will not have decided on their existence at the point of closing the settlement, the recoveries which would belong to the creditors holding such claims shall temporarily be held by a depositary. In case it should be validly established that such claims did not exist, the recovery instruments shall be redeemed.


F) Implementation of the Settlement

It has been envisaged that prior to closing the settlement agreement itself, for the sake of security of it being adopted, binding agreements would be closed on supporting the settlement.


H) Employees

All employment agreements shall be transferred to the New Group. Hence, the maximum employment which has been preserved within the Agrokor Group throughout the extraordinary administration procedure is intended to be preserved going forward.

I believe that we have herewith explained all the key aspects of the settlement term sheet.

Finally, I would like to express the firm belief shared by my colleague Irena Weber, myself and the creditors’ representatives with whom we have a continuous dialogue, that we shall successfully conclude the extraordinary administration proceeding by closing the settlement agreement within the statutory deadline.


Thank you.