UPDATE 1-Croatia set to pass law to shield economy from Agrokor-like fallouts
(Adds management changes at Agrokor firms, paras 8-9)
By Igor Ilic
ZAGREB, April 5 Croatia's parliament could pass an emergency law as early as Wednesday to shield the economy from big company failures after the country's largest private firm Agrokor piled up debts, leaving it struggling to pay creditors and suppliers.
Agrokor, the biggest food producer and retailer in the Balkans with 60,000 employees, built up debts of about 45 billion kuna ($6.5 bln), or six times its equity, as it expanded rapidly.
The law will be applied to Agrokor if the company fails to secure deals with creditors and suppliers and is intended to protect the economy in the event of future corporate failures.
"We want to protect our financial system, the economy, jobs, suppliers, family businesses and all the stakeholders involved in developments around our biggest firm," Prime Minister Andrej Plenkovic told parliament as he presented the legislation on Wednesday.
Under the law, which could be approved by parliament as soon as later on Wednesday, the state will be able appoint an executive to steer a restructuring process at the request of a debtor as well as at creditors' request with the company's agreement.
The law envisages a company reaching a restructuring deal within 15 months.
Agrokor struck a deal on Sunday with six lenders led by Russia's Sberbank and VTB to freeze debt repayments and get an unspecified cash injection.
In line with that, a restructuring expert was appointed to rescue the business. Antonio Alvarez III, of consultants Alvarez&Marsal, said on Tuesday there was no guarantee that the company could be saved.
Agrokor said on Wednesday that its retail chains in Slovenia and Croatia as well as a Serbia-based refined oils producer had replaced their top managers.
"The management changes in our key retail and food production companies aim at strengthening the company within a new business model and further restructuring plan," Agrokor said in a statement.
Agrokor suppliers, who are owed around 16 billion kuna ($2.29 billion), hope the new law will facilitate unfreezing of the company's accounts.
But food producers that supply Agrokor's retail chain Konzum, which controls almost a third of the local market, are worried payments will come too late to keep their businesses running.
"We're still delivering products, but we have no information whatsoever on how and when we will be paid," said Zvonimir Belic, the manager of tomato producer Zarja, based near the capital Zagreb, which employs 50 people. "I really don't know how to pay salaries this month."
The central bank said on Tuesday some banks might need a capital boost due to their exposure to Agrokor although the banking system as a whole was not in danger due to banks' relatively high average capital adequacy levels. (Editing by Susan Fenton)