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September 21, 2018 – On July 12, 2018, Agrokor d.d. (“Agrokor”) and eight affiliated Debtors filed for Chapter 15 protection with the U.S. Bankruptcy Court in the Southern District of New York, lead case number 18-12104. [Docket No. 1] Previously, on April 10, 2017, Agrokor commenced proceedings under the Croatian Extraordinary Administration Law (the “CEAL”) which was enacted in March 2017 by the Croatian government expressly to protect Agrokor from financial collapse and effectively bestowed “too big to fail” status on Agrokor. On September 21, 2018, the U.S. Bankruptcy Court issued an order recognizing the Croatian proceeding as a “foreign main proceeding” and thereby signalling that it would recognize the validity of that proceeding [Docket No. 30].
Agrokor was founded in 1976 as a flower grower and has grown into Croatia’s largest company with 50,000 employees in three core business segments: (i) Retail and Wholesale, (ii) Food and (iii) Agriculture. In the present Chapter 15 proceedings, Agrokor is represented by Adam C. Paul of Kirkland & Ellis. In documents filed with the U.S. Bankruptcy Court, Agrokor describes the interplay of the U.S. and Croatian proceedings as follows: “[The] Company has entered the Extraordinary Administration (the ‘Croatian Proceeding’) to achieve a settlement agreement (the ‘Settlement Agreement”) pursuant to the Croatian Extraordinary Administration Law…the Authorizing Body intends that the Settlement Agreement will be implemented through (a) the Croatian Proceeding; and (b) a recognition proceeding (the ‘Recognition Proceeding’) in the Bankruptcy Court to recognize the Croatian Proceeding as a foreign main or non-main proceeding under Chapter 15 of the Bankruptcy Code (the ”Recognition Order’).”
The Settlement Agreement is expected to be confirmed by the Croatian High Commercial Court shortly. On July 4, 2018, Agrokor announced that the Settlement Plan had been approved by creditors holding 80% of the Company’s claims by value. In a statement announcing the result, Fabris Peruško, Extraordinary Commissioner for Agrokor, noted, “It is a great success to resolve the threatening collapse of the largest Croatian company, which would have had devastating consequences on the economies of Croatia and the region, in only 14 months. Due to the fast and determined reaction of the Government, the collapse of this large company has not spilled over to Croatia’s entire economy.”
Peruško further notes that the responsibility for Agrokor’s financial crisis lies firmly with “Agrokor’s former owner Ivica Todoric and his way of running the business.” In October 2017, the Croatian State Attorney Office launched a criminal investigation against 13 members of Agrokor’s former governing and supervisory boards, including majority owner Ivica Todoric, on suspicions of abuse of power in economic business, forgery of official documents and breach of trade and business bookkeeping obligations. Mr. Todoric is reportedly currently residing in London, pending arrest and extradition.
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