Owner led Croatia's Agrokor to verge of bankruptcy - govt

"Audited financial statements clearly show the depth and severity of the problem created by the concern's owner Ivica Todoric, due to which the entire Agrokor Group is on the verge of bankruptcy," the government said in statement following the release of Agrokor's financial reports for 2015 and 2016 audited by PricewaterhouseCoopers LLP.

The results of the audit revealed that over 20 billion kuna ($3.1 billion/2.7 billion euro) had to be written off Agrokor's capital due to irregularities.

The government noted that the significant discrepancies between the audited and reported figures could be an indication of potential illegal activities.

"The government of Croatia expects the extraordinary administrator to take all necessary legal action to determine responsibility for the numerous irregularities established", it said.

The government added that the special law on extraordinary administration, under which Agrokor has been operating since April, has prevented the uncontrolled bankruptcy of the concern.

"The law and the procedure of extraordinary administration preserved jobs, prevented systemic risks from spreading across the economy, and preserved the stability of the economic system as a whole," the government said.

In April, the Croatian parliament adopted a law allowing the government to appoint temporary administrators in companies of systemic importance to lead a restructuring process at the request of the companies' creditors or the debtors themselves. Todoric was stripped of his managerial rights under the law popularly known as Lex Agrokor but remains owner of the concern.

Todoric recently said he is set to launch legal proceedings against the state for unlawfully seizing his company. He also said the billions lost in Agrokor were the result of the actions of the government and its extraordinary administration.

Agrokor has been in financial turmoil since January when Moody's downgraded its corporate family rating on the Croatian concern. Following Moody's decision, Agrokor pulled out of a syndicated loan deal it had struck with several international lenders, which sent the price of its bonds on international markets into a downward spiral.

(1 euro=7.50134 kuna)