A cross-practice team led by partner Tom Astle has advised a syndicate of c.75 lenders under a bespoke €1.06bn super priority loan to distressed Croatian food producing and retail giant Agrokor (the “SPFA“) on an English law scheme of arrangement proposed by the company. The scheme of arrangement was approved by 97.92% in number of the lenders under the SPFA, representing 99.99% in value of scheme claims, at the creditors’ meeting earlier this week, and was sanctioned by Mr Justice Fancourt this morning.
The scheme is seen as a crucial step in Agrokor’s preparations for successful implementation of its restructuring settlement plan, which was approved by its creditors in June last year. The restructuring regime in Croatia was adopted, based on Italian restructuring laws, specifically for the purpose of restructuring this business. The business operates across Croatia, Bosnia, Serbia and Slovenia although we structured the SPFA under English law. Under the settlement plan, the group will compromise a significant portion of its c.€6bn of debt by way of a debt for equity swap, resulting in creditors owning shares in a new Dutch and Croatian holdco structure, which will in turn hold shares in the new operating group. A condition precedent to implementation of the settlement plan is the amendment and restatement of the SPFA to novate it to the new group at the point of implementation, transitioning from Debtor in Possession (“DIP”) financing to a solvent first lien structure and positioning the group for a potential refinance this year following its exit from Lex Agrokor on a solvent footing. The amendments would have, without the scheme of arrangement, required all lender consent, which has historically proved impossible to obtain from a syndicate with c.75 lenders, including c.35 local trade suppliers.
Implementation of the settlement plan has been long awaited, and is expected in the coming months. Agrokor entered a pre-insolvency process in April 2017, under legislation specifically created for the group, informally known as “Lex Agrokor”. It is the largest privately owned company in Croatia, with a dominant position across its agricultural and retail sectors accounting for 15% of Croatian GDP. Lex Agrokor provided a moratorium on creditor action in relation to the c€6 billion debt obligations of the group, and a window of 12-15 months in which to negotiate the settlement plan with its creditors. This mandate continues to demonstrate our abilities in dealing with top end multi-billion cross-border distressed investing situations.