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The Buzz in Croatia: Interview with Damir Topic of Divjak, Topic, Bahtijarevic

The Buzz in Croatia: Interview with Damir Topic of Divjak, Topic, Bahtijarevic

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The main Buzz in Croatia, says Damir Topic, Senior Partner of Divjak, Topic & Bahtijarevic, remains the ballooning debt of Agrokor that resulted in the passage of a special law that saw the holding company placed under state administration in April of this year, and the ongoing ripple effect that crisis is having on the Croatian economy, which some predict could shrink by 10% or more as result.

“All the music stopped in April and the beginning of May,” Topic says, noting that it’s widely accepted by now that saving Agrokor is virtually impossible, “and that it will be a real collapse.” Still, Topic says, “the Agrokor special protection law will buy us time, so that collapse won’t be imminent, and it gives everyone time to prepare.” He says that, at the very least, “all the companies working with them are aware they’re going to have to take a big haircut.”

In addition, it’s become evident that a large number of Agrokor’s subsidiaries — the holding company is made up of some 143 firms, employing almost 57,000 people — will have to be sold, creating significant work for M&A lawyers in the country. Add to that the Agrokor suppliers who are already in bankruptcy or pre-bankruptcy proceedings and looking for strategic investors, and it’s a virtual boom for M&A and insolvency lawyers in the country. Topic says that "we are actually quite keen, preparing our troops for the end of this year and beginning of next year. Many of the subsidiaries are not so attractive, but some are among the best-performing Croatian companies, and we are already discussing how to be flexible and how to ensure we are available to assist on as many elements of this process as possible.” Topic describes the possibility of working on “two or three parallel deals simultaneously” as “quite a challenge” … and then he smiles: “but it’s a nice headache to have.”

Other than Agrokor, Topic says that Croatian business is doing surprisingly well, and he draws particular attention to M&A and real estate as "really vivid and growing," particularly in the tourism and shopping mall sale/resale sectors. "The only new construction is residential,” Topic says, reporting that “the residential sector is revived and people are buying flats even before they’re constructed.” He’s not too impressed, however, describing the phenomenon as “not realistic,” as “the problem is that because of really really low interest rates in banks, people are investing their money in real property,” which he describes as “more speculative than secure.”

Still, in general, Topic says, “the economy is going well.” He reports that the country’s GDP is growing and says that “unemployment is much lower than several years ago — though a part of this drop in unemployment is because a lot of young people have left Croatia for Germany or Ireland or other countries for work.” Regardless, he says, “the mood has moved from negative to positive, and people with regards to the economy are more comfortable.”

But Topic cautions against over-confidence: “It’s great, but we have a very thin coalition in the government at the moment, and autumn is always the time of year where things get active on the political scene — and it’s already gotten started in the summer with some stupid disagreements about removing plaques with old fascist signs or things like that.” Thus, he says, “there’s a real fear that the government could fall.” Even that might not be too much of a catastrophe, he concedes with a smile: “We tend to do better in terms of GDP in times where there is no governing coalition and only a technical government, anyway, so I don’t know what’s better.”

Finally, turning to the legal marketplace, Topic says he’s surprised to report a number of spin-offs in the market. “In contrast to other markets, where we hear about consolidation, here we have spin-offs going on. We just heard of two leading firms have lost high-profile partners.” He says, “This is still surprising to me, because while the market is good, it’s still not exactly El Dorado, so I honestly don’t know how people think they can maintain the same level of work and incomes, but maybe they have no choice. It’s strange for me that there are still so many split-offs going on."