Police raid home of boss of indebted Balkans retail giant

pulse

October 16, 2017 9:19 AM

Agrokor has around 60,000 employees in the Balkans, two-thirds of whom are in Croatia making it the country's largest employer.

Police on Monday raided the Zagreb home of the owner of ailing Balkans retail giant Agrokor after a months-long probe into possible criminal reasons behind the firms financial woes, HRT television reported.

As well as raiding the home of Ivica Todoric, who lives in a castle in an upscale neighbourhood of the Croatian capital, they were also searching the homes of several of Agrokor's former managers.

It was not immediately clear whether Todoric or his family were there at the time, with media reports suggesting he was overseas.

According to an audit published last week, the debt-ridden food group made a loss of 11 billion kunas (1.5 billion euros/$1.8 billion) in 2016 and the value of its capital fell by nearly 3.0 billion euros.

Ante Ramljak, who was brought in earlier this year to manage the crisis, said he had filed a criminal complaint against "responsible people who were in Agrokor's management in 2016" over suspected financial irregularities.

Prompted by Agrokor's crushing debt crisis, Croatia in May adopted a law aimed at shielding the country's economy from failing key companies.

The law, applied with Todoric's approval, allowed the government to name a crisis manager to lead a restructuring process which would last up to 15 months. If it was not successful within that time frame, bankruptcy proceedings would be initiated.

Earlier this year, international rating agencies lowered Agrokor's credit rating, citing its high indebtedness and rising refinancing risks.

Aggressive expansion

Agrokor's revenues account for around 15 percent of Croatia's gross domestic product. But the impact of the Zagreb-based company's crisis goes far beyond Croatia, a European Union member of 4.2 million people.

The firm also has businesses in neighbouring Bosnia, Serbia and Slovenia, while its network of suppliers means tens of thousands more are affected in a region where unemployment runs high.

The food and retail group ran up its debt through aggressive expansion and expensive borrowing -- a snowball that eventually turned into an avalanche.

Its main creditors are Russian state-owned banks Sberbank and VTB, to which it owes some 1.1 billion and 300 million euros respectively.

Agrokor's operations stabilised in June after it secured a 480-million-euro loan, arranged by bondholders led by Knighthead Capital Management and local banks.

Last month, Todoric published a blog in which he accused the government of abuse of power and of illegally taking control of his company.

Croatia emerged from a six-year recession in 2015 and its economy remains one of EU's weakest.

pulse