December 23 (SeeNews) - The European Commission said it has approved Croatia's plans to grant mechanical engineering company Djuro Djakovic [ZSE:DDJH] a restructuring aid of 430.6 million kuna ($65 million/57 million euro).
“The measure will enable the company to finance its restructuring plan and restore its long-term viability with the support of a private investor, the consortium of Czech companies DD Acquisition,” the Commission said in a statement on Wednesday.
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The planned restructuring aid will take the form of a debt-to-equity swap and a guarantee on potential future commercial claims. The restructuring plan also provides that a private investor, the consortium of Czech companies active in the same sector, DD Acquisition, will participate in a share capital increase with cash and in-kind contributions of approximately 64 million euro.
Following the capital increase, the new investor will become the controlling shareholder of Djuro Djakovic and will support various aspects of its restructuring with cash and synergies, and contribute its experience and market knowledge.
The Commission found that the aid is necessary to ensure that Djuro Djakovic will be viable long-term without the need of continued public support. This will also be ensured by the acquisition of control of the company by a private investor with core activities in the same industry.
“Moreover, the Commission found that the aid is appropriate, as it supports a comprehensive restructuring plan running until the end of 2023, and proportionate, with an own contribution of over 50% of the restructuring costs provided by the company and the investor at market terms,” it added.
“Finally, compensatory measures, in particular the withdrawal of the company from the project engineering market through the liquidation of the subsidiary Djuro Djakovic Industrial Solutions and the discontinuation of the production of three types of wagons, are provided to limit potential distortions of competition on the market for freight wagons where the company operates,” the EU's executive body said.
Djuro Djakovic employs 733 people and has a diversified industrial portfolio including defence, transport, industry and energy. The core business of the company at present is the manufacture of freight wagons for special purposes.
Earlier this week, it said that the commercial court in Osijek launched bankruptcy proceedings against its unit Djuro Djakovic Industrijska Rjesenja (Industrial Solutions) on December 20.
In a separate statement on Thursday, Djuro Djakovic said that the success of the restructuring programme depends on adoption of respective decisions by the government and the strategic investor and any final decision about the restructuring and the capital increase has to be taken by the company's shareholders.
Djuro Djakovic's shares traded at 2.55 kuna on the Zagreb bourse intraday on Thursday, down 36.25%.
(1 euro= 7.516 Croatian kuna)