JP Morgan Lends 235 Mln Euro in Total to Croatian State-owned Motorway Operators HAC, ARZ - Media

The loans taken out by HAC and ARZ have a five-year maturity and an interest rate of around 9.0%, Novi List (www.novilist.hr) reported over the weekend, quoting an unnamed source close to the government.

With the backing of the government, which has provided loan guarantees, HAC has signed a 100 million euro credit agreement with JP Morgan in a bid to settle the bill for a slew of projects, including tunnel upgrades and motorways in Dalmatia and Slavonia.

ARZ has also just signed a loan agreement with JP Morgan worth 135 million euro and will use the resource to service current obligations, one of the heftiest being those related to the construction of the Rijeka beltway, the daily said.

The news of the fresh borrowing came after the same daily reported earlier that the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) have tied the start of negotiations on new loans with the government in Zagreb to the scrapping of motorway construction deals worth a combined 1.0 billion euro.

The government will have to agree to these conditions as the central budget is overstretched and HAC's current funding model cannot cover further investment costs, Novi List (www.novilist.hr) reported, not naming its source.

The daily said the 29.6 kilometre Dubrovnik–Doli motorway and sections of the Zagreb–Sisak motorway and EU-defined corridor Vc were on the chopping block.

The north-to-south transport corridor Vc connects the Hungarian capital Budapest with the Croatian Adriatic port of Ploce via Bosnian territory.

The country's Motorway Commission will convene by the end of September at the latest to adopt a four-year plan for the construction of motorways and roads that will drop none of the planned projects but will simply extend their timeframe, the daily said, quoting an unnamed reliable source.

There has been no breakthrough so far in the talks that HAC is having with the building contractors on the projects facing cancellation so now the motorway operator expects the Infrastructure Ministry and the government to pull some weight with the industry. The builders' main objection to the scrapping of the deals has to do with the preliminary costs they have incurred and they have said they will seek compensations, the daily said.

The EIB and EBRD credits will be strictly targeted which means that all tenders will have to be rerun under the supervision of the international lenders, a process that is expected to last a year, Novi List said.

($=0.6865 euro)