too big ig to fail il Croatia redux Debtwire.com An Acuris - PowerPoint PPT Presentation

An Acuris Company 12 October 2017 AGROKOR – too big ig to fail il – Croatia redux Debtwire.com

An Acuris Company Background 3 Events Leading to Administration Filing 4 Lex Agrokor 7 Events since the filing 9 New Money Facility 12 Subsequent Events 14 Next Steps 15 Key Questions 15 Litigation 16 New Business Structure 17 Performance (January – July 2017) 18 Performance (FY 2016) 19 Audit findings for FY16 results 20 Speakers 22 Debtwire.com 2

An Acuris Company AGROKOR – too big to fail – Croatia redux BACKGROUND • Established in 1980, by Ivica Todoric a former flower trader, he expanded throughout the former Yugoslavia to include the import and export of cereals, oil-crops fruits and vegetables.  Expands dramatically throughout Croatia during Franjo Tudman presidency, acquiring First Croatian Oil Factory and DIP Turopolje in 1993, and Unikonzum and Ledo in 1994. • Issues three Eurobond issues during 2012 totalling EUR 886m equivalent.  Becomes largest retailer in the Balkans following EUR 261.8m acquisition of Mercator in 2014.  Mercator acquisition funded by a EUR 485m PIK Toggle loan and a EUR 210m term loan from VTB (Austria). Included the mandatory restructuring of USD 1bn of Mercator debt.  Largest employer in the Balkans with 60,000 employees, represents 16% of Croatian GDP. • As at end 3Q16, Ivica Todoric – Agrokor’s founder and CEO owned 95.52% of the company, with 2.07% held by the EBRD and 1.64% by other minor shareholders. Debtwire.com 3

An Acuris Company AGROKOR – too big to fail – Croatia redux EVENTS LEADING TO ADMINISTRATION FILING 18 January 2017 19 September 2016 28 October 2016 Agrokor announces pulled Launches EUR 100m syndication of syndication of club loan – PIKs come short-term loan facilities – follows Concludes EUR 340m loan under pressure on fears that they broader refinancing of EUR 500m of restructuring with VTB (Austria). short-term facilities via BNP, GS, CS, will fail to refinance in September JPM, and Sberbank. 2017. 22 February 2017 1 February 2017 10 February 2017 Russian ambassador applies political Debtwire article discloses potential Debtwire releases 3Q16 credit pressure - seeks early debt insolvency triggers – queries report – senior bonds fall seven repayment to Sberbank/VTB – liquidity position and outlines local points. cautions about further lending. legal framework. Debtwire.com 4

An Acuris Company AGROKOR – too big to fail – Croatia redux EVENTS LEADING TO ADMINISTRATION FILING 17 March 2017 10 March 2017 17 March 2017 Agrokor reportedly seeks EUR 300m loan from Sberbank – first Listed subsidiaries issue FY16 PIKs choose Moelis and Freshfields time that the company admits there earnings – intergroup borrowings as advisors. is a liquidity issue and a need for and payables soar. restructuring. 31 March 2017 28 March 2017 31 March 2017 Standstill signed by six creditor Subsidiaries bank accounts blocked, Croatian Parliament drafts law for banks – in return for CRO suppliers launch bankruptcy systematically important companies. appointment. petitions. Debtwire.com 5

An Acuris Company AGROKOR – too big to fail – Croatia redux EVENTS LEADING TO ADMINISTRATION FILING 7 April 2017 4 April 2017 6 April 2017 CRO Tony Alvarez – ‘situation is Parliament approves ‘Lex Agrokor ’ – Company is filed for extraordinary very serious, no guarantee we will enters into gazette late same administration by Ivica Todoric. succeed’. evening. 10 April 2017 Ante Ramljak appointed as Extraordinary commissioner. Debtwire.com 6

An Acuris Company AGROKOR – too big to fail – Croatia redux LEX AGROKOR Law for extraordinary administration procedure for Creditor council by legal ranking – but can be further   strategically important companies subdivided along economic interest lines Applies to companies with 5000 employees and HRK 7.5bn Creditors have 60 days to submit claims – can be challenged   (EUR 1bn) of debt commitments within 8 days of submission Moratorium on payments for 12-months – extendible for Disputed claims heard in court – enforceable doc can   further three months instruct civil proceedings Allows commissioner to take actions needed for the regular Restructuring requires simple majority in each class, 2/3 of   operations of the debtor creditors in aggregate to approve Allows payments to reduce systemic risk – if approved by Can flip into bankruptcy proceedings at any time – if no   creditors council likelihood of successful outcome Workers claims have priority status – protecting jobs (at co  and suppliers) is key aim Debtwire.com 7

An Acuris Company AGROKOR – too big to fail – Croatia redux LEX AGROKOR Key differences from pre-insolvency and insolvency law Uncertainties Allows super senior financing (post filing) Treatment of intercompany claims   Political oversight – advisory committee headed by a finance Rights of listed subsidiaries – can minority shareholders   ministry appointee make claims too? Supplier payments can be made during process – if Bills of exchange – who should submit claims, the suppliers   approved by creditor council or the holder? Repurchase agreements, rights of repo counterparties to  retain shares Pledged shares from restricted group – can these be  recovered? Debtwire.com 8

An Acuris Company AGROKOR – too big to fail – Croatia redux EVENTS SINCE THE FILING 18 April 2017 13 April 2017 13 April 2017 Bondholder committee revealed – Agrokor receives EUR 80m loan – AXA, Fidelity, Jupiter, Knighthead Bondholders offer EUR 400m of but Russian banks ‘opt out’ – loan and T Rowe Price – PJT Partners and super senior financing. less than EUR 150m requested. Hogan Lovells. 20 April 2017 18 April 2017 19 April 2017 Temporary creditor committee Memorandum on bills of exchange Administration extended to 20 appointed – Sberbank, Zagrebacka launched – to protect suppliers from affiliates – for those with 25% stake Banka, Kras, Knighthead Capital and recourse claims. Valid until 31 May. or more. Toni Raic. Debtwire.com 9

An Acuris Company AGROKOR – too big to fail – Croatia redux EVENTS SINCE THE FILING 26 April 2017 25 April 2017 26 April 2017 AlixPartners appointed as Sberbank considers selling EUR Slovenia passes ‘Lex Mercator’ – to restructuring advisor – PwC to 1.1bn of loans – indicative offer in protect subsidiary from Croatian provide audit on FY16 accounts – mid-30s – bank provisions 50% of its claims. KPMG to assess creditor claims. exposure. 30 May 2017 11 May 2017 11 May 2017 Commissioner sets early June Company issues RFP for another deadline for new money provision – advisor – talks intensify over new Debt stack revealed as at 31 March. seeking better terms to EUR 80m money provision – as key summer facility (L+ 497bps). sales period looms. Debtwire.com 10

An Acuris Company AGROKOR – too big to fail – Croatia redux EVENTS SINCE THE FILING 8 June 2017 2 June 2017 7 June 2017 Temporary creditor committee Committee meets again to discuss meets for second time, roll-up new money proposal (to mitigate Terms of new money announced. legality discussed. roll-up concerns). Debtwire.com 11

An Acuris Company AGROKOR – too big to fail – Croatia redux NEW MONEY FACILITY EUR 1.06bn of facilities, of which EUR 530m is new money EUR 480 million is structured as a long-term loan, and the   (doubled-up to avoid roll-up legality issues) key conditions are 1:1 refinancing of funding lenders’ debt before the initiation of Extraordinary Administration procedure based on drawn amounts on new loan and EUR 480m underwritten by bondholders headed by  interest of 4% annually accrued to principal or 3.8% cash Knighthead Capital Management payable annually. Domestic market tranche arranged by Zagreba č ka banka  Super senior with 15- month’s maturity – fund’s company to  the end of extraordinary administration period New financing to secure sustenance of ongoing business  operations of Agrokor and operating companies. EUR 150 million from new financing is agreed to be used for  repayment of old debt to suppliers Existing banks and suppliers have ability to participate,  alongside ad hoc committee members. On top of the EUR 480 million, EUR 50 million is agreed  upon for creditors who are suppliers and who can provide Non-committee members have ability to subscribe if banks  goods or services instead of money, under identical terms as fail to take-up entitlements. financial creditors with 1:1 refinancing of their old debt. Debtwire.com 12

An Acuris Company AGROKOR – too big to fail – Croatia redux NEW MONEY FACILITY EUR 150m made available for settlement of pre-petition trade claims, split into three pools: Pool A (up to EUR 30m) : Dedicated pool for ‘micro’ suppliers, defined as family farms (OPG), small entrepreneurs, small and micro - suppliers with annual revenue less than HRK 5.2 million, maximum of HRK 2.6 million in assets and up to 10 employees Pool B (EUR 110 – EUR 120m) : This pool is open to all suppliers (except the Pool A micro-suppliers). Suppliers must confirm they will return to historic and/or industry standard terms of supply in order to be eligible; and Pool C (up to EUR 10m) : Discretionary pool for settlement of pre-petition trade suppliers in accordance with identified business needs. Debtwire.com 13