April 3 (SeeNews) - Four of the largest Croatian banks, Russia's VTB and Sberbank, and representatives of heavily indebted Croatian concern Agrokor formally initialled on Sunday a standstill arrangement taking effect on Monday, local Erste&Steiermaekische Bank said.
On Friday, VTB, Sberbank, Erste&Steiermaerkische Bank, Privredna banka Zagreb, the local unit of Austria's Raiffeisenbank and Zagrebacka Banka, all members of Agrokor's coordination committee of financial creditors, reached an agreement with the company to help it stabilise its operations and service its obligations to suppliers, Erste said in a statement sent to SeeNews.
Other financial creditors of Agrokor have been invited to join the agreement.
"The standstill should facilitate the efforts of the company to address issues of liquidity, ensure business continuity, protect the value of the concern, as well as to present the basis for a sustainable restructuring of the group," Erste&Steiermaerkische Bank reiterated over the weekend.
The standstill foresees the strengthening of Agrokor's management board by introducing international experts. It will also see the appointment of a chief restructuring officer who will be the key persons for the implementation of the stabilisation programme.
Several Agrokor units reported on Friday that their bank accounts have been blocked due to outstanding financial obligations.
Also on Friday, Croatia's government said it has endorsed a bill to protect the country's economic and financial systems from the impact of large corporate failures. The law will apply to companies that employ over 5,000 people and whose obligations top 7.5 billion kuna ($1.1 billion/1.0 billion euro).
The bill encompasses caretaker management of companies of systemic importance, and in order for the provisions of the law to be activated, a proposal to that effect must be made either by a company with a large number of employees and high liabilities or by its creditors, but with the debtor's consent, the government explained.
"This is not an attempt at nationalisation, expropriation or a form of state interventionism that would, without consent, endanger anyone's property," Plenkovic is quoted as saying. "This law respects the Croatian constitution, respect the sanctity of property rights, and freedom of entrepreneurship."
Local media are speculating the law was drafted to save Agorkor, but say that it has been debased by the standstill agreement which saw creditors beat the government to Agrokor's rescue.
Plenkovic is to meet the company's suppliers on Monday, but the topic of discussion has not been disclosed.
Agrokor's financial issues became apparent earlier this year when Moody's downgraded the company's corporate family rating (CFR) to B3 from B2. The company then 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= 7.43739 kuna)