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Creditors' Council Unanimously Confirms Settlement Plan

Members of the Temporary Creditors’ Council have, at the meeting held on 19 June, 2018, unanimously accepted the settlement plan between the debtors and all creditors submitted to the Council by the Extraordinary Commissioner and have given approval to the Commissioner to deliver the adopted wording as a common settlement plan proposal to all creditors by publishing it on the Zagreb Commercial Court’s e-bulletin board.

Approximately seven thousand and three hundred pages of the settlement plan with accompanying enclosures will be sent on Wednesday (20 June 2018) to the Zagreb Commercial Court, which will then publish the document on the e-bulletin board. The publication of the settlement plan wording is to be expected during this week. Upon publication, the Commercial Court will schedule a voting hearing on the Settlement Plan that must be held within a period of not less than five and not more than 15 days.

Following the publication on the Zagreb Commercial Court’s e-bulletin board, the Settlement Plan documents will be published and made available in Croatian and English to all creditors at the website: nagodba.agrokor.hr .

The Settlement Plan consists of two parts – the descriptive and the constructive part – and comprises 32 chapters and 36 schedules. The documentation elaborates in detail the corporate structure of the New Agrokor Group, the treatment and form of recovery of pre-petition creditors’ claims, the breakdown of the new debt of the New Agrokor Group and its capital structure as well as other details related to the implementation of the settlement plan. Detailed tables of all claims, payments made during the Extraordinary Administration procedure and debt recoveries through the settlement for each individual claim are an integral part of the documentation. One of the appendices displays the distributive value of the EA companies.

Given the number of companies in the Agrokor Group and the complexity of the financial restructuring, the creditors have themselves confirmed the Entity Priority Model (EPM) as the best model for the recovery of their claims. It is a fair and equitable form of recovery used in major international restructuring processes and enjoys broad acceptance among international creditors. In line with the statutory regulations, this model manages the claim recovery waterfall for each individual company, including guarantees for the debt of other companies, and claims are being handled from an aspect of their legal position.

According to the calculations based on the EPM model, the biggest share in the ownership of the new Agrokor Group will belong to financial creditors and among them the largest individual owner will be Sberbank with 39.2 percent of shares. Bondholders will have 24.9 percent of ownership and domestic financial institutions 15.3 percent. The share of suppliers in the new ownership will be 4.7 percent.

Viewed by creditor groups, suppliers and bondholders have on average lesser write-offs than financial institutions. The highest rate of return of 100 percent was realized by micro companies who had their claims paid in full. Suppliers of Agrokor will on average get a 60 percent return for their claims for goods and services delivered, with 46 percent of suppliers to get a return between 80 and 100 percent. The rate of return for bondholders is between 40 and 80 percent. The majority of domestic and international financial institutions and other creditors will on average get a return of up to 20 percent for their claims.

The Settlement Plan also contains two special agreements: agreement with suppliers and agreement with Sberbank.

An agreement was reached with the suppliers on the payment of the so-called border debt if certain conditions are met and the highest total amount of border debt that can be paid during a four year period (2018-2021) is up to EUR 80 million. The payments of border debt are subject to Konzum’s operating performance and are defined by the minimum EBITDA for Konzum, specified to be EUR 38.3 million per calendar year.

As for suppliers who had financed Agrokor through recourse bills of exchange, an agreement has been reached within the Settlement Plan and by mediation of the Extraordinary Administration that Aisle Dutch TopCo would not exercise its rights, including enforcement, arising from assigned claims against the recourse debtors, provided they have reached an agreement with the creditors (banks) pursuant to which they would settle between 30 and 40 percent of the claim, and submitted proof of such agreement to the Extraordinary Administrator by the date of the Settlement Plan confirmation.

The special agreement with Sberbank states that Sberbank will have a contingent right over a period of four years – from 2018 to 2021 to receive payments provided that a group of 17 materially significant companies generate an agreed level of operating profit. The EBITDA treshold for 2018 is EUR 245 million and it gradually increases up to EUR 288 million in 2021. The total amount for the four payments to Sberbank cannot exceed EUR 60 million and the payment obligation terminates after four years regardless of the amount finally paid.

SPFA lenders and Sberbank have agreed on all terms of the SPFA extension. The extension is planned until not later than mid-2019 and a refinancing is also possible prior to that deadline. The agreed interest rate is Euribor + 8 percent (6 percent cash / 2 percent PIK) until 10 January 2019. From 10 January 2019 the interest rate will be Euribor + 10 percent, rising by +0.5 percent PIK in each subsequent month. A 2 percent fee will be paid in July 2018 and another 1 percent fee in January and April 2019, respectively.

After the settlement voting hearing is held and the Settlement Plan becomes effective, it is planned for the implementation process to last between three and four months.