When asked what’s happening in Croatia, Dusko Zuric’s answer is simple: "Agrokor is happening.” Zuric, the Managing Partner of Croatia’s Zuric i Partneri, sighs at the extent of the liquidity fallout from the implosion of Agrokor’s landmark 2013 acquisition of Slovenia’s Mercator, which created one of the biggest food and retail businesses in Central and Eastern Europe, but also resulted in the accumulation of almost EUR 6 billion in debt, leading Agrokor’s president and 95% owner, Ivica Todoric, to seek protection from creditors and to hand control of the group to the emergency administration controlled by the Croatian state and court, all under a newly passed law — nicknamed Lex Agrokor — creating a form of pre-bankruptcy protection for systemic enterprises.
The significance of the crisis is hard to over-estimate. Agrokor employs 60,000 people in Croatia, Slovenia, Serbia, Bosnia-Herzegovina, and Hungary and supports many more jobs at suppliers. Its reported EUR 6.5 billion annual revenues are equivalent to about 15 percent of Croatia’s gross domestic product. As a result, the country’s finance minister has warned that the crisis could reduce Croatia's economic growth this year, and many believe that a bankruptcy could have disastrous impacts on the country’s economy. "It’s our national exercise,” says Zuric. "I think everyone is involved. We’re working on the other side, for creditors, banks, and suppliers.” When asked if the crisis is demanding full use of the firm’s resources, Zuric sighs. "Not all of our time,” he smiles ruefully, “but all of our brain power.”
Zuric notes that the Croatian government has created special legislation to address the growing crisis, after concluding that it posed "a systemic risk for the country's economy.” It’s also having serious affects in Bosnia, "and to a small extent even for Slovenia,” he said. Zuric emphasizes that the Croatian government had acted quickly and appropriately in acting to address the matter. “Once the crisis became visible to the country, the government recognized it as a systemic risk and acted for the benefit of all stakeholders,” he says, adding that “this is one of the few occasions where most will agree the government acted in the right direction.” Zuric reports that one way or another the special administration will not linger too long, as the special administrator is required to act and reach a restructuring deal within 15 months. If the deal is not reached within this period, he says, the procedure of emergency administration will be terminated, “leaving everyone with an even more complex situation.”
Still, this is obviously no laughing matter to Zuric and his colleagues. He concedes that the crisis is providing significant business for law firms in Croatia, but insists it is not really the kind they prefer. "It’s not something we like to promote. It is fantastic for the workloads of the legal profession, but it’s too serious to discuss or think of in these terms. It will of course mean a lot of work — but it’s more serious than that. It’s a complex cross-border, cross-business exercise, with five main categories of creditors.” And with almost every leading firm in the market getting work from the deal, there is little competition for business. “Since basically everyone is involved, all the law firms are simply following their own clients. We’re not fighting for work. We’re flooded with it. Everybody is dealing with it. However, since M&A is one of our core practice group, we are looking at this a bit further and are hoping that our firm will get involved at the point when the real restructuring of Agrokor starts.
Although it can be hard to look past the Agrokor implosion, Zuric says that otherwise things are going mostly well in his country, "We’ve had a severe crisis since 2008, but for the last two years public finances are a bit better and still improving. We’re in a growth phase. Lawyers usually see their business follow a year behind the economy. So we’re seeing that benefit now.” When asked to identify which sectors are leading the growth, he points to real estate. “Particularly commercial real estate, but we’re seeing moderate growth across all real estate sectors.” Still, Zuric insists, it’s not only the real estate sector that’s growing. “Overall business is in a good mood,” he says. "Especially now that it’s summer — summer in Croatia is like steroids. The touristic sector is doing well — and the forecasts are for it to do even better."
In addition, Zuric continues “the public finance sector looks like it has improved. It looks we are about to exit the excessive deficit procedure required by the European Union. And it seems that the government has managed to get it under control. Normal people may not feel it, but businesses feel it. Improvements instability, access to funding and credit, even reductions in the deficit — and then of taxes. This is something, as a taxpayer, I’m really looking forward to. This was never the plan that was discussed openly, to reduce the debt. This was a surprise, and everybody’s happy. Our public debt is falling."
