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Croatian retail giant Agrokor downgraded by S&P, can't pay debt

Staff Writer |
S&P Global Ratings said it has lowered its corporate credit rating on Croatian retailer Agrokor to SD/--/SD from CC/Negative/C.

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At the same time, the ratings agency lowered its issue rating on the three series of senior unsecured notes to 'D' from 'CC', it said in a statement.

S&P explained that it decided to lower its ratings because on May 1, 2017, Agrokor missed a coupon payment on its 300 million euro senior secured notes due 2019.

"Under a new Croatian law, Agrokor is restricted from making debt payments to lenders and bondholders.

"Therefore, we think it is highly unlikely that Agrokor will resume payments within the 30-day grace period," it commented.

The ratings agency also said: "On April 6, 2017, Croatia enacted a law - "Law on Procedures for Extraordinary Management in Companies of Systematic Significance" - that restricts Agrokor from making any interest or principal payments on its debt over the next 12 months.

"Under the standstill agreement Agrokor signed with its main lenders, its bank debt payments are currently frozen.

"Under our criteria, we consider all the above to be tantamount to a default, because we do not expect Agrokor to be able to make a payment within the grace period of 30 days.

"For the $300 million senior notes due 2020 and the €325 million senior notes due 2020, we note that payment default on senior debt above €20 million at Agrokor constitutes an event of default under the documentation.

"In addition, given the new law in Croatia, we do not expect Agrokor to be able to make a payment on these notes over the next 12 months.

"We lowered our corporate credit rating on Agrokor to 'SD', rather than 'D', because we understand that Slovenia-based retail subsidiary Mercator (whose assets are outside the restricted group) has received a waiver from its lenders and continues to meet its financial obligations."

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