Croatian Deputy Premier Resigns Over Role in Agrokor Law

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(Bloomberg) -- Croat Deputy Prime Minister Martina Dalic resigned from her post amid allegations of conflict-of-interest tied to her role in the state-led restructuring of Agrokor d.d., the country’s biggest company.

“Deputy Premier Dalic and I have agreed that she resign from her post,” Prime Minister Andrej Plenkovic said at a news conference in Zagreb Monday. Dalic, who accompanied him, said she had stepped aside to avoid being a burden to the government.

A 50-year-old former banker who is also Economy Minister, Dalic said in February that she wrote Lex Agrokor, a special law that allows the government to take over large failing companies to protect the rest of the economy. Last week, Zagreb-based portal Index published what it said were private emails from 2017, showing Dalic consulted legal and financial experts while drafting the law, some of whom were later hired as subcontracting advisers in Agrokor’s restructuring.

This is the second blow to Plenkovic’s government in connection with Agrokor’s collapse. In an attempt to shield the economy from the potential bankruptcy of privately-owned Agrokor, parliament approved the law last year and the government appointed consultant Ante Ramljak to lead the restructuring. Ramljak, one of the people Dalic consulted in drafting the law, resigned in February amid criticism over fees paid to his former company, which was also hired as an adviser at Agrokor.

Not Ideal

Plenkovic said the government engaged experts who could help prevent a worst-case scenario of cascading bankruptcies. Those experts were later engaged as subcontracting advisers in Agrokor.

“That wasn’t ideal, and I regret that there wasn’t more time and more transparency,” he said. “But we achieved our basic strategic aim, which was saving the economy and saving jobs.”

The governing coalition is seeking to finalize a settlement for Agrokor by July 10, when the state’s oversight expires, according to Ivan Vrdoljak, leader of the junior coalition member People’s Party.

“Our priority is continuing with the settlement process and finalizing the settlement by the deadline,” he said by phone.

Legal Challenges

The special law, known as Lex Agrokor, is recognized in the U.K. but not in Serbia and Montenegro, while an initial affirmation in Slovenia is under appeal. Croatia’s constitutional court last week affirmed the law’s legality.

With two key figures connected to Agrokor’s restructuring gone, the government now risks that unhappy creditors may file lawsuits, challenging the validity of the entire restructuring process, Danko Sucevic, an analyst at Zagreb-based financial consultancy Infokorp, said by phone.

“If the lawsuits start appearing, then we will be able to estimate the full impact and possible damage of Lex Agrokor, and the prime minister is now exposed to the full responsibility,” Sucevic said. “Some bankruptcy experts had warned the government about it from the start.”

Agrokor’s creditors, represented in the temporary creditors’ council, in April agreed on a basic settlement model. Under the company plan, a final proposal will be submitted next month to creditors, two-thirds of whom must approve it. The deal then requires a go-ahead from the courts by the end of the extraordinary administration period on July 10. The debt restructuring will then be completed by the end of the year.

©2018 Bloomberg L.P.

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