December 21, 2017 / 4:40 PM / a year ago

Local suppliers of Croatia's Agrokor reject settlement proposal

* Suppliers call the settlement proposal unjust

* Agrokor’s crisis manager says further talks with follow

* Settlement needs backing of creditors with 66 pct of claims

* Deal needs to be reached by July 2018

ZAGREB, Dec 21 (Reuters) - Domestic suppliers of indebted Croatian food group Agrokor rejected on Thursday a settlement scheme which would include a debt-for-equity swap and a debt write-off.

Agrokor, which owes roughly 5.5 billion euros ($6.5 billion) to some 5,700 creditors including banks, bondholders and suppliers, aims to restructure its debt into a combination of new sustainable debt and equity.

The biggest employer in the Balkans with around 60,000 staff was put into state-run administration in April and has until July 2018 to reach a final deal with creditors to avoid bankruptcy.

“We reject a proposal presented to us because of its unjust treatment of some creditors. Creditors of Agrokor’s retail chain Konzum would get the worst terms which is unacceptable,” said Marica Vidakovic from the confectionery producer Kras after a meeting between Agrokor’s crisis management and suppliers.

Vidakovic is a representative of major local suppliers in the interim creditors’ council.

According to the proposal, the creditors will become 100 percent owners and have full operational control of a new holding and its companies. Final percentages of debt recovery have yet to be determined.

Also, those which gave a liquidity loan to Agrokor last June to be able to survive and continue operations and those which have claims secured by a collateral would be in line for repayment first.

Agrokor’s domestic suppliers said earlier this month they hoped for a settlement deal which would involve a haircut of up to 30 percent for them and up to 70 percent for banks and bondholders.

The head of Agrokor’s crisis management team, Ante Ramljak, said after the meeting that further talks would follow.

“These are initial positions. It was expected that some creditors would not be happy. We’ve yet to see to what extent some changes might be possible or not,” he said.

The final settlement requires the backing of creditors holding at least 66 percent of the claims.

$1 = 0.8429 euros Reporting by Igor Ilic; Editing by Elaine Hardcastle

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