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ZAGREB (Croatia), April 5 (SeeNews) - S&P Global Ratings said on Wednesday it has lowered its long- and short-term corporate credit ratings on Croatian retailer Agrokor to 'CC/C' from 'B-/B', with a negative outlook.
At the same time, the ratings agency has lowered the issue rating on the company's senior unsecured notes to 'CC' from 'B-', it said in a statement.
S&P explained that it decided to lower its ratings following news that Agrokor and a group of its creditors have reached a deal to freeze debt payments.
"Agrokor is likely to undergo credit restructuring on distressed terms, which would be tantamount to default under our rating methodology," it commented.
The ratings agency also said:
"On April 2, 2017, a spokesperson for the Agrokor group said that the company reached an agreement with its bank creditors to freeze debt payments. The creditor group includes Sberbank, VTB, and Erste Bank, which together account for most of the €2.5 billion loan debt for the Agrokor group, as of Sept. 30, 2016.
The banks have indicated that they might provide Agrokor with €300 million of additional credit lines to fund its short-term liquidity needs, which consist mostly of payments to suppliers. We believe that these new borrowings are necessary to keep the company operational after what appears to be an abrupt reduction in trade credit terms extended to it by its suppliers.
We understand that the proposed transaction still remains subject to a signed agreement between Agrokor, its owners, and the main banks. We believe, however, that the standstill agreement is likely to represent a reduction in economic value relative to the original terms of Agrokor's loan package and will be considered distressed under our methodology.
The outlook is negative. We expect to downgrade Agrokor to 'SD' (selective default) if the standstill is agreed under terms that we consider distressed."