January 16 (SeeNews) - The Croatian government said on Thursday it has approved the issuance of up to 300 million kuna ($45 million/40 million euro) in guarantees on a planned life-saving loan for diversified group Djuro Djakovic [ZSE:DDJH].
The guarantees will be issued to the Croatian Bank for Reconstruction and Development (HBOR) or/and any other domestic or foreign lenders that will sign a credit agreement with Djuro Djakovic Grupa and its subsidiaries - Djuro Djakovic Special Vehicles (DDSV) and Djuro Djakovic Industrial Solutions (DDIR), the government said in a statement after its weekly meeting.
The issuance of the loan guarantees is in line with EU rules on state aid, the government noted.
Djuro Djakovic plans to use the proceeds of the loan within six months after its withdrawal and no later than December 31, 2020.
Up to 150 million kuna will go towards unblocking the company accounts, restarting production and completing work on orders already in progress, as well as for the payment of overdue debt to financial institutions and the state.The remaining up to 150 million kuna will be used mainly to service DDSV's payments to suppliers and creditors.
The loan will also provide for the payment of 18.5 million kuna in salaries to employees - from January until May, at the latest.
It will also support the payment of liabilities to DDSV's suppliers on contracts in progress, worth a combined 40.2 million kuna, including the 9.7 million kuna production of 34 railcars for Austria's Swietelsky, the 18.4 million kuna production of 80 railcars for US-based GATX and the 12.1 million kuna production of 60 railcars for France's Ermewa.
DDSV produces freight and tanker wagons, special vehicles such as battle tanks, wheeled armoured vehicles, and engineering machines.
Djuro Djakovic's overdue liabilities to financial institutions worth 7.6 million kuna will also be serviced by the loan.
At the same time, the government is requiring from Djuro Djakovic's shareholders, management and supervisory board to adopt all necessary decisions that enable the entry of a possible strategic partner, in line with the company's restructuring programme. They should also adopt necessary procedures for a possible share capital cut or increase.
The government has authorised the finance ministry to issue the loan guarantee only after Djuro Djakovic meets several conditions by January 24, which include regulating the relations with creditors so that the repayment of a good amount of the existing claims is postponed until after May 30, 2020.
As of January 16, the government controls a stake of some 29% in Djuro Djakovic, according to Zagreb bourse data. Outside the government and its funds, local individual Nenad Bakic controls the largest single stake of 17.71% in the group.
Djuro Djakovic's shares gained 5.47% to 5.40 kuna by 1400 CET on Thursday on the Zagreb Stock Exchange, after the government said it would provide the much-needed loan guarantee.
The group's main lines of business are manufacturing of equipment for steelworks, industrial and power plants, rolling stock and special-purpose motor vehicles.
(1 euro = 7.44487 kuna)