Croatian government picks AlixPartners to advise on Agrokor restructuring

28 June 2017 Consultancy.uk

AlixPartners have been selected as advisors for the restructuring of Croatian food-to-retail consortium Agrokor Group. Agrokor, which represents around 15% of Croatia’s GDP, entered into Extraordinary Administration due to the group’s unmanageable debt levels.

The financial crisis of the largest privately-owned company in Croatia, foods group Agrokor, has dominated recent headlines in the region, after global agencies began reducing the company’s credit rating. Croatia recently emerged as one of the main tourist destinations in the heart of Eastern Europe, but the Balkans' largest food manufacturer and retailer Agrokor is deemed equally as important to the economy as the country’s flourishing tourist industry.

The ailing group is Croatia’s largest employer, and their current predicament leaves some 60,000 employees in the region with growing doubts surrounding their future at the company. While the company’s revenue amounted up to around €6.7 billion, which is also 15% of Croatia’s GDP, the most recent data gathered by Reuters showed Agrokor’s debts still stood at a staggering 45 billion Kuna (€6.3 billion). The main part of their business is the supermarket chain Konzum, but the consortium also maintains a presence in the agriculture, food production, tourism and distribution segments.

With the future of further transactional payments still unresolved, and the mounting fears of rising unemployment in Croatia, the group also serves the needs of markets in neighbouring countries Bosnia, Serbia and Slovenia, suggesting a regional crisis could emerge if the situation does not improve.

HQ of Agrokor

Too big to fail

Amid these grim economic prospects, consulting firm AlixPartners have been appointed by the Croatian government to restructure Agrokor, after they expressed willingness to provide advice to the ailing food-procurer.

The company is a recognised leader in the corporate turnaround and restructuring industry, ranking as the fifth largest in the sector, however the firm had to ward off bids from five other major consulting forces. McKinsey, BCG, EY, KPMG and Roland Berger all had offers turned down though, as Ante Ramljak, who has been appointed by the government as the firm’s crisis manager, recommended AlixPartners for the job, with the firm subsequently winning the approval of Croatia’s Ministry of Economy, Entrepreneurship and Crafts.

Commenting on his choice, Ramljak said, “In competition with five other respectable international firms I believe we have chosen the best offer, which includes both quality and price. As a next step, we will prepare a restructuring plan and submit it for approval to creditors."

In cooperation with Agrokor, AlixPartners has placed emphasis on defining a plan alongside its main shareholders to arrange interim liquidity, cash forecasting and management processes, and defining a plan with the company and its main shareholders for all divisions and business units. The restructuring approach aims to ensure a continuous cash-flow, while preserving Agrokor’s ability to provide value to customers.

Since AlixPartners’ appointment, Agrokor has begun implementing the approach, and has managed to momentarily stabilise, in part through the securing of €480 million in debt-relief from bondholders headed by Knighthead Capital Management, with an additional €50 million in debt secured from suppliers. The secured debt allows the company to continue its operation going forward into the next season, while allowing for further internal restructuring and optimisation of its various businesses and their integration.

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