April 13, 2017 / 4:55 PM / 3 years ago

Slovenia adopts law to shield economy from Agrokor crisis

SARAJEVO, April 13 (Reuters) - Slovenia’s government on Thursday introduced a law to shield its economy from the negative effects of a crisis at Croatian company Agrokor , region’s largest retailer, which was taken over by the state last week after coming close to collapse.

Slovenia’s law would prevent the outflow of funds from companies owned by Agrokor that are of systemic importance for Slovenia’s economic stability, Minister of Economic Development and Technology Zdravko Pocivalsek told a news conference. The companies include Slovenia’s biggest retailer Mercator.

Agrokor, the biggest food producer and retailer in the Balkans with 60,000 employees, handed control to the Croatian government last week under an emergency law.

Agrokor’s debts totalled around 45 billion kuna ($6.44 billion), or six times its equity, according to data from last September, although sources familiar with the situation believe debt has risen further in the last six months.

Mercator, owned by Agrokor, employs nearly 11,000 people in Slovenia and, together with food and other industries that rely on it, accounts for 10 percent of the country’s gross domestic product (GDP).

Slovenia’s new law allows the government to appoint an associate management board member at companies with over 6,000 employees if their majority shareholder becomes insolvent, the government said in a statement.

Pocivalsek said the law would be forwarded to parliament for urgent debate.

“We need such a law because we have to prevent a depletion of Mercator, which might occur as a result of Agrokor’s problems,” the Slovenian government posted on Twitter.

Agrokor on Wednesday secured an initial cash injection of 80 million euros ($85.04 million) which will be used to repay some of its local suppliers.

Ante Ramljak, the restructuring expert appointed by the Croatian government to lead the process, said on Tuesday that Agrokor would need 450 million euros to operate normally in the next 10 months, during which time the company would be restructured.

Some of Agrokor’s debt stemmed from its acquisition of Mercator.

$1 = 0.9407 euros) ($1 = 6.9835 kuna) (Reporting by Maja Zuvela. Editing by Jane Merriman)

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