engleski

The Agrokor Group's roll-up financing: business as usual or a deviation from common practice

In Q1 2017 Croatian policymakers prepared a legislative act that, over and above the ordinary pre-bankruptcy and bankruptcy procedures, envisaged a special reorganisation regime for a distressed company of “systemic importance”. The Republic of Croatia Systemically Important Company Emergency Management Procedures Act stipulates that, during a one-year period, the systemically important company’s business operations must be stabilized and an agreement on claims settlement between creditors be reached, or standard bankruptcy procedures will be invoked. In case of an activated emergency management procedure, super-seniority post-petition debts may be incurred with the prior consent of the creditors’ council, if used to reduce systemic risk, maintain business continuity, retain assets or cover operational business cost payments. The trigger for the preparation and passage of the lex specialis was undoubtedly the situation in Agrokor, the financially troubled largest privately-owned company in Croatia and one of the leading regional companies, and indeed, immediately after the lex entered into force, this emergency management procedure was initiated in the Agrokor Group. In critical moments for the company i.e. mid-April 2017, the emergency management arranged a syndicated revolving facility of €80m, followed in June 2017 by a new debt deal in the amount of €1.06bn. The latter one, the (in)famous so called roll-up financing, raised such a tide of public’s questions about its (un)suitability that just a few months later, when new debt creation was enabled in pre-bancruptcy procedures through the legislative amendment of the Bancruptcy act, the Croatian lawmakers apparently shied away from the possibility of rolling up pre- petition debts. This paper provides insight into this type of financing and how it became part of Agrokor's new debt, whereby distinctly underscoring that the existence of a systemic crisis management framework based on entirely transparent and well-argued processes is a necessity if public credibility of the process and its participants (stakeholders) is to be preserved.

financial distress, emergency management, roll-up financing, transparency

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