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07 March 2019

Croatia: Agrokor's administration proceedings are entering the final stage

After almost two years, the extraordinary administration proceedings over Agrokor and 77 of its Croatian group companies is entering its final stage.

On 1 March 2019, the Commercial Court in Zagreb followed the motion of extraordinary commissioner Fabris Perusko to announce 1 April 2019 as the so-called Implementation Commencement Date (the "ICD"). On the ICD, the settlement plan which became binding on 18 October 2018 will be implemented. During the implementation, Agrokor will no longer operate its business, which instead will be transferred to a recently incorporated Croatian joint stock company, currently named AISLE HoldCo d.d.

While most of the well-known consumer brands will survive, the new holding company will no longer be named Agrokor but will be renamed Fortenova Grupa d.d. ("Fortenova"). Fortenova will be structured as a joint stock company, with nine directors and three executive directors, with the CEO being a member of both bodies. For the time being, Mr Perusko will be CEO and Irena Weber, currently the deputy extraordinary commissioner, will stay on as COO. There has been no word on who will act as CFO.

Fortenova is owned by Aisle Dutch HoldCo ("HoldCo"), which is in turn owned by Aisle Dutch TopCo ("TopCo"), both incorporated as Dutch BVs. TopCo will be ultimately owned by Aisle STAK ("STAK"), a Dutch stichting. The beneficial owners of STAK and therefore of Fortenova will be the former creditors of the Agrokor group. The purpose of this structure is to separate legal and beneficial ownership in the Fortenova group.

Already last year Fortenova started to incorporate Croatian limited liability companies that will serve as the new operational companies. These operational companies will be named after the existing subsidiaries of Agrokor, but with an added "plus", e.g. "Konzum plus". The aim is to mirror the existing structure as far as possible.

Conversion of creditors' claims

On the ICD, the claims of Agrokor's pre-petition creditors and its non-viable subsidiaries will be assigned automatically under the settlement to TopCo. As consideration for the assignment of pre-petition claims, creditors will receive a combination of two instruments issued by the Dutch holding companies consisting of new equity and structurally subordinated convertible bonds. Each creditor will be awarded depositary receipts from STAK, which holds all the shares in TopCo. The depositary receipts and convertible bonds are stapled together, thereby preventing the transfer of convertible bonds and depositary receipts independently.

Transfer of assets

TopCo will transfer the claims against the Agrokor group to Fortenova or the relevant subsidiary of Fortenova, e.g. claims against the Konzum d.d. will be transferred to the new Konzum entity, Konzum plus. Due to this transfer, TopCo has a claim against the relevant subsidiary, e.g. Konzum plus, which can later be used to upstream cash efficiently.

Fortenova and its subsidiaries will acquire all viable assets of the Agrokor group, using the claims against the Agrokor group as consideration.

The shares in the 32 existing viable Croatian subsidiaries of Agrokor will be transferred to Fortenova. The shares in the 82 foreign subsidiaries, such as Mercator and Idea, will be transferred by way of share or asset transfers under the relevant local law.

Non-viable Croatian subsidiaries will not be transferred, but these 45 companies, including Konzum d.o.o., Ledo d.o.o. and Jamnica d.o.o., will transfer their assets to the relevant newly incorporated mirror subsidiary of Fortenova.

The list of assets to be transferred, which is over 4,500 pages, is part of the settlement, but it is expected that further actions will be required. For this reason, the settlement stipulates that any assets not specifically listed also transfer and that each Agrokor subsidiary is obligated to give any additional statements and consents or to perform additional actions for the transfer to be executed.

The transfer of shares and assets shall, where possible, take effect on 1 April 2019. Between now and 1 April 2019, Agrokor and Fortenova are preparing the transfer off all assets, and Fortenova is also working on setting up the operational infrastructure to operate Agrokor's business. Given the sheer size of Agrokor's operations (some 50,000 employees will be transferred to Fortenova) this will be a very challenging task.

Once a company has transferred its assets, the remaining company will be merged into Agrokor d.d. After all companies have been merged, Agrokor d.d., once the second-biggest retailer in Southeast Europe, will be dissolved and deleted from the register 30 years after its incorporation. This will mark the end of one of the most complicated and contentious restructurings in the region.


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Further reading:
The fall of Agrokor - a partial history



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