1 00:00:00,200 --> 00:00:03,120 Speaker 1: In two thousand and eight, an investment bank named Lehman 2 00:00:03,200 --> 00:00:06,760 Speaker 1: Brothers collapsed, sending the United States and much of the 3 00:00:06,800 --> 00:00:10,479 Speaker 1: world into a financial crisis and recession that it's still 4 00:00:10,600 --> 00:00:14,720 Speaker 1: recovering from today. On benchmark, we're turning our attention to 5 00:00:14,920 --> 00:00:18,759 Speaker 1: another country, this time in Eastern Europe that's facing its 6 00:00:18,880 --> 00:00:23,439 Speaker 1: own Lehman like moment, except this time, the troubled company 7 00:00:23,480 --> 00:00:26,760 Speaker 1: that could bring down that nation's economy is not an 8 00:00:26,800 --> 00:00:40,320 Speaker 1: investment bank. It's one that makes and sells food. I'm 9 00:00:40,360 --> 00:00:44,440 Speaker 1: Scott Landman, an economics editor with Bloomberg in Washington, and 10 00:00:44,560 --> 00:00:48,080 Speaker 1: I'm Daniel Moss, I brought about global economics for Bloomberg 11 00:00:48,159 --> 00:00:50,960 Speaker 1: View in New York. So the country we're going to 12 00:00:51,000 --> 00:00:55,280 Speaker 1: talk about today is Croatia, And like most Americans, I 13 00:00:55,320 --> 00:00:57,640 Speaker 1: haven't visited the place. I don't know a whole lot 14 00:00:57,680 --> 00:01:00,520 Speaker 1: about it except that it was involved in a really 15 00:01:00,600 --> 00:01:04,200 Speaker 1: terrible ethnic conflict in the former Yugoslavia. Can you help 16 00:01:04,200 --> 00:01:07,520 Speaker 1: me out, Dan, Have you been there before? I have not, 17 00:01:07,840 --> 00:01:12,760 Speaker 1: but I am intrigued that a supermarket could swallow a 18 00:01:12,840 --> 00:01:17,200 Speaker 1: country's g d P. And when not talking about Amazon 19 00:01:17,400 --> 00:01:21,480 Speaker 1: or Walmut, All right, let's bring in our two resident 20 00:01:21,560 --> 00:01:23,640 Speaker 1: experts who have been on top of this story in 21 00:01:23,680 --> 00:01:28,160 Speaker 1: recent months. Yasmina Kuzmanovich is a reporter for Bloomberg based 22 00:01:28,200 --> 00:01:32,160 Speaker 1: in the Croatian capital of Zagreb. Luka Kasaragi is a 23 00:01:32,200 --> 00:01:36,880 Speaker 1: corporate finance reporter for Bloomberg in London. Yasmina, Luca, thanks 24 00:01:36,920 --> 00:01:40,880 Speaker 1: for joining us. Thank you, Yasmina. Can you start us off? 25 00:01:41,040 --> 00:01:45,440 Speaker 1: The company that threatens Croatia is called agro Core. Can 26 00:01:45,480 --> 00:01:48,240 Speaker 1: you give us a brief history of where it started 27 00:01:48,280 --> 00:01:51,280 Speaker 1: and how it got so big? That's right. The company 28 00:01:51,520 --> 00:01:54,120 Speaker 1: was started by its owner if it's a Toddo rich 29 00:01:54,160 --> 00:01:58,200 Speaker 1: who started it as a flower business in the nineteen seventies. 30 00:01:58,520 --> 00:02:01,200 Speaker 1: This is when Croatia was still part of socialist Yugoslavia 31 00:02:01,840 --> 00:02:06,400 Speaker 1: and the country was introducing some pro market reforms. Then, 32 00:02:06,440 --> 00:02:11,600 Speaker 1: after creation independence, when the government abandoned the communist model 33 00:02:11,639 --> 00:02:16,560 Speaker 1: for the market economy, uh Toddo Riches business really took off. 34 00:02:16,680 --> 00:02:21,560 Speaker 1: It grew into a retail and also food conglomerate, not 35 00:02:21,600 --> 00:02:26,200 Speaker 1: only in Creatia but also in neighboring countries. He expanded 36 00:02:26,240 --> 00:02:30,360 Speaker 1: by borrowing, usually at very high interest rates. Even in 37 00:02:30,400 --> 00:02:33,639 Speaker 1: those early years, because Creatia was seen as a new 38 00:02:33,680 --> 00:02:37,480 Speaker 1: country as a as a risk in the past year, 39 00:02:37,560 --> 00:02:42,280 Speaker 1: the borrowing caught up with the company, and eventually in January, 40 00:02:42,320 --> 00:02:46,040 Speaker 1: the lenders stopped offering additional financing and death sent the 41 00:02:46,080 --> 00:02:51,440 Speaker 1: company into a dead crisis, at which point the government, 42 00:02:51,639 --> 00:02:54,760 Speaker 1: concerned about the spill over to the rest of the 43 00:02:54,760 --> 00:02:58,920 Speaker 1: creation economy and the region, brought a special law designed 44 00:02:58,960 --> 00:03:03,200 Speaker 1: to shield the economy and systemic risk and todder each 45 00:03:03,280 --> 00:03:07,040 Speaker 1: The owner invoked the law in April, So since April, 46 00:03:07,080 --> 00:03:11,959 Speaker 1: the government, the companies under the government restructuring. Let's zoom 47 00:03:11,960 --> 00:03:16,000 Speaker 1: out a little bit, how much of croatious GDP is threatened? 48 00:03:16,080 --> 00:03:20,880 Speaker 1: If you take everything together, including suppliers to this company. 49 00:03:21,720 --> 00:03:26,600 Speaker 1: Nobody has really offered a definitive figure for this. We 50 00:03:26,639 --> 00:03:30,640 Speaker 1: can we can definitely say that our core annual revenue 51 00:03:31,080 --> 00:03:34,680 Speaker 1: is about seven billion dollars, which is equivalent to about 52 00:03:34,760 --> 00:03:39,080 Speaker 1: fifteen percent of creatious g d P. However, when you 53 00:03:39,160 --> 00:03:43,560 Speaker 1: take into account the suppliers, and the suppliers ranged from 54 00:03:43,560 --> 00:03:47,840 Speaker 1: the smallest farmers to the big food producers and processors, 55 00:03:47,960 --> 00:03:53,080 Speaker 1: then this effect is obviously multiplied. The administrator, the state 56 00:03:53,120 --> 00:03:57,920 Speaker 1: appointed administrator who is now overseeing the company, recently said 57 00:03:57,920 --> 00:04:01,160 Speaker 1: that about half a million people in the agent could 58 00:04:01,240 --> 00:04:05,040 Speaker 1: be affected if, in the case of agricults collapse. So 59 00:04:05,200 --> 00:04:11,040 Speaker 1: this company is Croatia's economy in a way, Yes, yes, 60 00:04:11,880 --> 00:04:13,680 Speaker 1: I mean, like you're talking about at the top ten. 61 00:04:13,800 --> 00:04:16,599 Speaker 1: If you're trying to take some analogy to the US economy, 62 00:04:16,680 --> 00:04:21,440 Speaker 1: would probably be something like Amazon and Walmart and you know, 63 00:04:21,600 --> 00:04:24,680 Speaker 1: Kroger or other large grocery chains, and you roll them 64 00:04:24,720 --> 00:04:27,520 Speaker 1: all together, and you know, it would probably account for well, 65 00:04:27,560 --> 00:04:29,400 Speaker 1: if you have if you have a nineteen trillion U 66 00:04:29,400 --> 00:04:32,679 Speaker 1: S economy, you're talking you know, at least several trillion 67 00:04:32,720 --> 00:04:35,520 Speaker 1: dollars worth of GDP or the equivalent, if you're kind 68 00:04:35,520 --> 00:04:38,240 Speaker 1: of making that straight comparison, right, and if you were 69 00:04:38,240 --> 00:04:42,120 Speaker 1: including the supplies a lot more exactly. I mean, it's 70 00:04:42,120 --> 00:04:46,640 Speaker 1: certainly it's certainly bigger than than what Lehman's brothers represented it. 71 00:04:46,960 --> 00:04:50,080 Speaker 1: It is bigger than the impact for creation. Is bigger 72 00:04:50,120 --> 00:04:53,680 Speaker 1: than the impact of the car industry in the US 73 00:04:53,720 --> 00:04:57,359 Speaker 1: and a similar event when the government was saving the 74 00:04:57,400 --> 00:05:01,200 Speaker 1: car industry. It's it's really it's really hard to describe 75 00:05:01,240 --> 00:05:05,000 Speaker 1: the in terms of other countries globally what what this 76 00:05:05,080 --> 00:05:07,480 Speaker 1: would mean. But this company, yes, it is, it is 77 00:05:07,520 --> 00:05:10,760 Speaker 1: Croatia and looka let me bring you in so you 78 00:05:10,760 --> 00:05:13,800 Speaker 1: can talk about the the international financial angle on. That's 79 00:05:13,839 --> 00:05:16,880 Speaker 1: how jasmin I was talking about how it started to 80 00:05:16,920 --> 00:05:18,880 Speaker 1: take on debt and it got it got trouble in 81 00:05:18,960 --> 00:05:22,680 Speaker 1: that angle. What exactly did the company do and how 82 00:05:22,880 --> 00:05:29,320 Speaker 1: did it get into the situation with international lenders. The 83 00:05:29,400 --> 00:05:34,119 Speaker 1: company has been a bond issuer for for many years. 84 00:05:34,960 --> 00:05:43,200 Speaker 1: Um has offered interesting yields for investors. International investors because 85 00:05:43,200 --> 00:05:47,520 Speaker 1: of its it's perceived as an Eastern European company, so 86 00:05:48,520 --> 00:05:53,760 Speaker 1: riskier than Western European equivalents. The turning point in the 87 00:05:53,839 --> 00:05:59,240 Speaker 1: story in the story here Agricore is probably when the 88 00:05:59,320 --> 00:06:03,680 Speaker 1: company acquired a large competitor in the in the region, 89 00:06:03,920 --> 00:06:09,760 Speaker 1: as Slovenian company called Mercatur, hoping it would make could 90 00:06:09,800 --> 00:06:15,240 Speaker 1: merge its own retail business with Mercatur's retail business, improved profits, 91 00:06:15,320 --> 00:06:20,440 Speaker 1: make savings and shield the company from the competition from 92 00:06:20,600 --> 00:06:25,040 Speaker 1: other retailers from the European Union. Remember here that Creatier 93 00:06:25,200 --> 00:06:30,000 Speaker 1: joined the U in twent but after that they realized 94 00:06:30,040 --> 00:06:35,880 Speaker 1: that the merger wasn't going as planned. Profits didn't improve, 95 00:06:37,080 --> 00:06:44,240 Speaker 1: competition from other especially discount retailers like Legal in Croatia, 96 00:06:44,440 --> 00:06:49,039 Speaker 1: who was getting stronger and stronger. As Yasmina said earlier, 97 00:06:49,040 --> 00:06:51,479 Speaker 1: at the beginning of twenty seventeen, the company tried to 98 00:06:51,520 --> 00:06:55,120 Speaker 1: refine and some of the loans they had taken out 99 00:06:55,200 --> 00:07:00,839 Speaker 1: with Western and Eastern European Russian banks in previous years. 100 00:07:01,480 --> 00:07:06,919 Speaker 1: The market wasn't ready to refinance those, uh, those debts, 101 00:07:06,960 --> 00:07:13,200 Speaker 1: and that triggered panic that spread from bond holders, two banks, 102 00:07:13,560 --> 00:07:18,680 Speaker 1: two suppliers, landlords, and eventually the govern the Creation government 103 00:07:18,840 --> 00:07:22,160 Speaker 1: and also other governments in the region where our Work 104 00:07:22,160 --> 00:07:26,679 Speaker 1: Corps operates felt they need to intervene to to prop 105 00:07:26,800 --> 00:07:31,679 Speaker 1: up the company. So, in other words, investors just didn't 106 00:07:31,720 --> 00:07:35,480 Speaker 1: feel that even though they were offering probably pretty generous yields, 107 00:07:35,480 --> 00:07:37,720 Speaker 1: I mean, what kind of yields were they offering on 108 00:07:37,760 --> 00:07:42,360 Speaker 1: their on their ponds slightly less than ten percent, which 109 00:07:42,360 --> 00:07:45,520 Speaker 1: in the current environment is even even with that, that 110 00:07:45,680 --> 00:07:48,640 Speaker 1: was still you know, those are very high for that 111 00:07:48,680 --> 00:07:52,080 Speaker 1: region basically, and that was just too risky for people 112 00:07:52,120 --> 00:07:57,520 Speaker 1: to take on, right. Yeah. And at the time also 113 00:07:57,800 --> 00:08:01,920 Speaker 1: he was starting to become clear that there were some 114 00:08:02,000 --> 00:08:07,119 Speaker 1: problems with the accounting of the company. A few months 115 00:08:07,120 --> 00:08:10,440 Speaker 1: into these crisis, we still don't have an exact figure 116 00:08:10,560 --> 00:08:15,200 Speaker 1: for the total debt of agro Core because there were 117 00:08:15,960 --> 00:08:20,240 Speaker 1: a lot of the suppliers took out loans from local 118 00:08:20,320 --> 00:08:25,080 Speaker 1: banks eventually guaranteed by agro Core, which may have not 119 00:08:25,280 --> 00:08:29,800 Speaker 1: been recorded on our core balance sheets. Countants are still 120 00:08:29,880 --> 00:08:33,640 Speaker 1: looking into that, but again at at this moment, we 121 00:08:33,720 --> 00:08:36,760 Speaker 1: still don't have an exact figure for for for the 122 00:08:36,800 --> 00:08:42,120 Speaker 1: debt on the company. How is Russia involved in all this, Well, 123 00:08:42,160 --> 00:08:44,400 Speaker 1: there are two elements here that we need to bear 124 00:08:44,440 --> 00:08:49,160 Speaker 1: in mind. Russian banks UM controlled by directly by the 125 00:08:49,600 --> 00:08:53,040 Speaker 1: Russian State by the Kremlin, are the biggest lenders to 126 00:08:53,160 --> 00:08:57,120 Speaker 1: agro Cores. BA Bank, which is Russia's largest bank a 127 00:08:57,280 --> 00:09:01,840 Speaker 1: loan lands almost one point five billion dollars to Agricore 128 00:09:02,240 --> 00:09:05,560 Speaker 1: in the past few years UH, and it did that 129 00:09:06,440 --> 00:09:12,480 Speaker 1: as it expanded outside its domestic market around twenty VTB, 130 00:09:12,559 --> 00:09:15,240 Speaker 1: the second largest bank is also is the second largest 131 00:09:15,280 --> 00:09:19,960 Speaker 1: lender to to agro core UM. The other elemental bearing 132 00:09:20,000 --> 00:09:24,080 Speaker 1: mind is that Croatia is a crucial country for geopolitical 133 00:09:24,120 --> 00:09:29,800 Speaker 1: region reasons within southeastern Europe. It's part of the U, 134 00:09:29,880 --> 00:09:33,360 Speaker 1: it's part of the nature UH and as large access 135 00:09:33,360 --> 00:09:37,680 Speaker 1: student mediterraneancy historically has been aligned with Germany and the US. 136 00:09:37,800 --> 00:09:43,280 Speaker 1: It's a predominantly Catholic country, but Russia at the same 137 00:09:43,320 --> 00:09:46,280 Speaker 1: time has had an historical interest in the region and 138 00:09:46,480 --> 00:09:50,720 Speaker 1: is closed to Serbia, which is the largest country informer 139 00:09:50,760 --> 00:09:57,920 Speaker 1: Yugoslavia and the main enemy of Croatia during the ethnic 140 00:09:57,960 --> 00:10:02,040 Speaker 1: conflict of the nineties. UH. We don't know whether the 141 00:10:02,320 --> 00:10:06,720 Speaker 1: loans to Agricore, the loans by Russian banks to Agricore, 142 00:10:06,840 --> 00:10:10,720 Speaker 1: how a geo political motivation to start with. We don't 143 00:10:10,720 --> 00:10:13,320 Speaker 1: have it and we don't have evidence for that. But 144 00:10:13,600 --> 00:10:16,640 Speaker 1: what we can say is that Croatian politicians want to 145 00:10:16,679 --> 00:10:21,360 Speaker 1: avoid the country's largest company goes under Russian control, and 146 00:10:21,400 --> 00:10:25,080 Speaker 1: they've tried to avoid that since the start of the crisis. 147 00:10:25,800 --> 00:10:28,240 Speaker 1: Where we are at at the moment is a Burbank, 148 00:10:28,800 --> 00:10:32,080 Speaker 1: as the largest lender, wants to recover its money, but 149 00:10:32,320 --> 00:10:35,840 Speaker 1: it walked out of a deal signed by other creditors 150 00:10:35,920 --> 00:10:40,640 Speaker 1: of Agricore, including banks and funds, Hedge funds, American edgemants, 151 00:10:41,000 --> 00:10:45,360 Speaker 1: and it's starting legal battles against the company and also 152 00:10:45,400 --> 00:10:53,320 Speaker 1: the Croatian government in um several Bokan countries, including Croatia, Serbia, Slovenia, 153 00:10:53,520 --> 00:10:56,360 Speaker 1: but also in the uk not so much the end 154 00:10:56,440 --> 00:10:59,560 Speaker 1: of history. No, it feels like we are just at 155 00:10:59,559 --> 00:11:03,240 Speaker 1: the beginning of it. And we'll probably hear more about 156 00:11:03,240 --> 00:11:05,880 Speaker 1: this company in the next the next few months. So 157 00:11:05,920 --> 00:11:08,520 Speaker 1: this is much more than just a Lehman like effect 158 00:11:08,559 --> 00:11:10,959 Speaker 1: on the economy. This is something that you know, it's 159 00:11:10,960 --> 00:11:14,240 Speaker 1: almost like the West versus Russia again. You know, you 160 00:11:14,280 --> 00:11:16,720 Speaker 1: have you have Ukraine not too far away, and that's 161 00:11:16,720 --> 00:11:19,319 Speaker 1: been kind of a tug of war in recent years, 162 00:11:19,360 --> 00:11:22,160 Speaker 1: and now it seems that could affect Croatia too. I mean, 163 00:11:22,160 --> 00:11:25,120 Speaker 1: it's just even more interesting angle to the story. Maybe, 164 00:11:25,280 --> 00:11:29,240 Speaker 1: um Yasmina, I'm curious, how does this affect the average 165 00:11:29,240 --> 00:11:33,600 Speaker 1: citizen in Croatia and how would people feel about, uh, 166 00:11:33,640 --> 00:11:36,679 Speaker 1: you know, this company being in trouble and also the 167 00:11:36,720 --> 00:11:40,480 Speaker 1: potential power play by the Russians too, uh, maybe get 168 00:11:40,520 --> 00:11:43,840 Speaker 1: more leverage in the region there, right. I mean, as 169 00:11:43,840 --> 00:11:49,480 Speaker 1: we said, Agrocot has about fifty people employees, about half 170 00:11:49,480 --> 00:11:56,200 Speaker 1: of them in Croatia. So considering that Agrocot makes things 171 00:11:56,280 --> 00:11:59,920 Speaker 1: from pok sausages to ice cream, it has business in tourism, 172 00:12:00,040 --> 00:12:03,680 Speaker 1: in travel, in real estate. Uh, it owns the main 173 00:12:03,720 --> 00:12:07,000 Speaker 1: newspaper distributor in creation it owns luxury hotels on the 174 00:12:07,000 --> 00:12:12,000 Speaker 1: Creation coast, movie theaters in Belgrade. Uh. It is really 175 00:12:12,000 --> 00:12:15,160 Speaker 1: hard to find a family that doesn't have some connection 176 00:12:15,720 --> 00:12:19,480 Speaker 1: to Agricre, either through somebody who is directly employed to 177 00:12:19,600 --> 00:12:22,520 Speaker 1: somebody who supplies or even somebody who writes for a 178 00:12:22,559 --> 00:12:27,240 Speaker 1: fashion magazine whose magazine has is sold on this Uh. 179 00:12:27,920 --> 00:12:31,920 Speaker 1: Through this chain of newspaper kills that ag Record owns, 180 00:12:32,080 --> 00:12:35,240 Speaker 1: people actually lost jobs because of the agrocor crisis in 181 00:12:35,280 --> 00:12:40,040 Speaker 1: the in the French magazine L, you know, the the 182 00:12:40,120 --> 00:12:44,000 Speaker 1: creation version, the creation edition of L magazine. That sounds 183 00:12:44,760 --> 00:12:52,280 Speaker 1: really bizarre, but bizarre people are people are concerned what 184 00:12:52,520 --> 00:12:54,680 Speaker 1: is going to happen to ag Record. There was some 185 00:12:54,840 --> 00:12:57,960 Speaker 1: shot and freud in the beginning because the person the 186 00:12:58,040 --> 00:13:00,400 Speaker 1: owner of a re record. We we have to remember 187 00:13:00,440 --> 00:13:03,600 Speaker 1: that though the government is running restructuring, the owner formally 188 00:13:04,120 --> 00:13:06,600 Speaker 1: of this whole conglomerate is still if it's at Todo 189 00:13:06,679 --> 00:13:11,079 Speaker 1: rich uh. And he ran the business as um as 190 00:13:11,120 --> 00:13:14,120 Speaker 1: a taikoon. He he ran it as a family fiefdom. 191 00:13:14,200 --> 00:13:18,960 Speaker 1: His three adult children were employed at top positions, family 192 00:13:19,040 --> 00:13:23,240 Speaker 1: friends in laws. He made always sure that among his 193 00:13:23,320 --> 00:13:28,120 Speaker 1: employees are spouses and children of ministers, judges, of regulators, 194 00:13:28,120 --> 00:13:31,440 Speaker 1: of politicians. So there was a little bit of glee 195 00:13:31,600 --> 00:13:35,120 Speaker 1: that this that this emperor has fallen down. But now 196 00:13:35,520 --> 00:13:39,560 Speaker 1: I think people are concerned, and people understand the geopolitical 197 00:13:39,640 --> 00:13:43,880 Speaker 1: reasons that they don't want Russia to become or Russian 198 00:13:44,360 --> 00:13:49,280 Speaker 1: or Russian owned bank to become the owner of the 199 00:13:49,320 --> 00:13:55,760 Speaker 1: biggest avocorate is the owner of most agricultural land in Creatia. 200 00:13:55,880 --> 00:13:59,000 Speaker 1: So they don't want Russian state or the Russian bank 201 00:13:59,040 --> 00:14:02,959 Speaker 1: to get that. As Luca said, it's interesting that the 202 00:14:03,040 --> 00:14:06,559 Speaker 1: Russian the two Russian banks came into the landing game 203 00:14:06,679 --> 00:14:09,679 Speaker 1: quite late in two thousand fourteen, and what was their 204 00:14:09,760 --> 00:14:14,760 Speaker 1: interest in in in landed to Agricore, which already was 205 00:14:15,960 --> 00:14:20,880 Speaker 1: had financial troubles. It's it's quite clear. Now, Um, we 206 00:14:21,000 --> 00:14:23,120 Speaker 1: have to see what happens in this type of war 207 00:14:23,280 --> 00:14:27,080 Speaker 1: because bad bankers, Luca said, is suing Agricore from London 208 00:14:27,200 --> 00:14:31,000 Speaker 1: through the Balcons in every form. It was count almost 209 00:14:31,000 --> 00:14:35,320 Speaker 1: every Slovenia and Bostonia, Croatia and Serbia and uh. I 210 00:14:35,360 --> 00:14:39,120 Speaker 1: think the next year will be crucial for for all this. 211 00:14:39,840 --> 00:14:44,400 Speaker 1: So what happens next if people don't want Russia expanding 212 00:14:44,440 --> 00:14:48,200 Speaker 1: its influence in a region where it has historically middled. 213 00:14:48,680 --> 00:14:52,600 Speaker 1: What's the alternative? The I m f UM the short 214 00:14:52,640 --> 00:14:55,800 Speaker 1: timeswer on the IMF. I don't think this is likely. 215 00:14:55,960 --> 00:14:58,720 Speaker 1: The Creatia was lost in the IMF program in the 216 00:14:58,760 --> 00:15:01,800 Speaker 1: ninety nineties and then after that had a long recession, 217 00:15:02,280 --> 00:15:05,440 Speaker 1: six year long recession, but it it recovered and currently 218 00:15:05,520 --> 00:15:11,920 Speaker 1: creatos GDPs actually expanding. The government has stopped this possible 219 00:15:12,040 --> 00:15:16,600 Speaker 1: chaotic bankruptcy by bringing the special law in April, so 220 00:15:16,640 --> 00:15:21,280 Speaker 1: it stopped the situation from deteriorating. And whether the question 221 00:15:21,320 --> 00:15:25,320 Speaker 1: of bailout comes up again really depends largely on how 222 00:15:25,360 --> 00:15:28,120 Speaker 1: successful the government will be in the restructuring, whether it 223 00:15:28,160 --> 00:15:31,440 Speaker 1: can help arrange a successful settlement, because there are only 224 00:15:31,440 --> 00:15:34,840 Speaker 1: two outcomes here, a settlement or bankruptcy. But can you 225 00:15:34,880 --> 00:15:38,840 Speaker 1: have a successful settlement without your biggest creditor, and that's 226 00:15:38,840 --> 00:15:43,360 Speaker 1: a bad bank. That's a huge question here. Can we 227 00:15:43,440 --> 00:15:48,800 Speaker 1: make this about something more than agricole and Croatia? What's 228 00:15:48,840 --> 00:15:53,760 Speaker 1: the parable here? The parable as in um? How is 229 00:15:53,760 --> 00:15:57,360 Speaker 1: this all possible? No? I mean, is there a broader 230 00:15:57,440 --> 00:16:02,040 Speaker 1: significance here than just a recall and its travails? And 231 00:16:02,400 --> 00:16:09,000 Speaker 1: whither Croatia is there a story here about how a small, 232 00:16:10,720 --> 00:16:15,480 Speaker 1: relatively new country which was part of a broader grouping 233 00:16:16,560 --> 00:16:19,280 Speaker 1: is finding it tough to stand alone. I can answer 234 00:16:19,320 --> 00:16:22,840 Speaker 1: from the Eastern European point of view, and specifically from 235 00:16:22,880 --> 00:16:26,720 Speaker 1: from the from the point of view of former Yugoslav countries. 236 00:16:26,880 --> 00:16:30,640 Speaker 1: This I think the parable is and the lesson here, 237 00:16:30,680 --> 00:16:34,400 Speaker 1: if you want, is that Agriculty is the result of 238 00:16:34,440 --> 00:16:38,640 Speaker 1: the of the chrony economy, of the of the chrony 239 00:16:38,880 --> 00:16:43,320 Speaker 1: socialism that became chrony capitalism, because you simply couldn't have 240 00:16:44,280 --> 00:16:50,480 Speaker 1: such a company UH doing the business so untransparently and 241 00:16:50,560 --> 00:16:53,600 Speaker 1: in a gray area, as Luca mentioned, the way they 242 00:16:53,640 --> 00:16:57,640 Speaker 1: didn't pay the suppliers on time, the with the suppliers 243 00:16:57,680 --> 00:17:02,800 Speaker 1: had long delays in payment UH. The Creation Central Bank 244 00:17:04,080 --> 00:17:07,040 Speaker 1: played the good role because several years ago it limited 245 00:17:07,080 --> 00:17:10,600 Speaker 1: the bank's exposure the creatian banks exposure to agro Coord, 246 00:17:10,840 --> 00:17:14,800 Speaker 1: but other regulators were not so quick. So because it 247 00:17:14,840 --> 00:17:17,639 Speaker 1: couldn't get any more cash from the local banks, Agrocord 248 00:17:17,760 --> 00:17:23,560 Speaker 1: developed this whole way of financing UH through suppliers actually 249 00:17:23,640 --> 00:17:26,680 Speaker 1: getting loans and then giving ag Record the biggest part 250 00:17:26,680 --> 00:17:30,359 Speaker 1: of those funds. It seemed that everybody knows every knew 251 00:17:30,400 --> 00:17:33,960 Speaker 1: everything and this was this was tolerated by every government 252 00:17:34,800 --> 00:17:38,280 Speaker 1: for well obviously for a quarter of the century. And 253 00:17:38,320 --> 00:17:42,960 Speaker 1: the lesson here is this, this has to stop. Even 254 00:17:43,000 --> 00:17:46,840 Speaker 1: the suppliers that are now in problems also played their 255 00:17:46,920 --> 00:17:53,000 Speaker 1: part here. They they continue to help Agricord under those circumstances, 256 00:17:53,040 --> 00:17:56,879 Speaker 1: and they need to another thing. When you said, is 257 00:17:56,920 --> 00:17:59,840 Speaker 1: this going to lead to to bail out it all 258 00:17:59,880 --> 00:18:03,040 Speaker 1: the pens whether the companies all that by Agricot and 259 00:18:03,080 --> 00:18:08,200 Speaker 1: other creation companies will change their business model, whether they 260 00:18:08,200 --> 00:18:11,320 Speaker 1: will diversify, whether they will go to other retail chains 261 00:18:11,359 --> 00:18:14,119 Speaker 1: and they had to become more competitive. They need to 262 00:18:14,200 --> 00:18:19,359 Speaker 1: change all this for the for the camp for actually 263 00:18:19,400 --> 00:18:21,639 Speaker 1: for the company and for the whole economy to to 264 00:18:21,800 --> 00:18:25,399 Speaker 1: get not to end in in in a chaotic situation. 265 00:18:25,840 --> 00:18:27,760 Speaker 1: And the next year will be crucial for all that. 266 00:18:28,400 --> 00:18:30,640 Speaker 1: Look at you want to get an last word here, yeah, 267 00:18:31,040 --> 00:18:36,959 Speaker 1: I thought, as another lesson, maybe we can. It's probably 268 00:18:36,960 --> 00:18:41,680 Speaker 1: for its a lesson for UH for international investors UM. 269 00:18:41,720 --> 00:18:45,160 Speaker 1: When Agrico came to the market, it paid more than 270 00:18:45,520 --> 00:18:49,080 Speaker 1: competitors than peers in Western Europe, not only because it 271 00:18:49,119 --> 00:18:52,280 Speaker 1: was based in UH in Eastern European country, but also 272 00:18:52,359 --> 00:18:56,520 Speaker 1: because analysts and I spoke to many of them after 273 00:18:56,520 --> 00:19:00,919 Speaker 1: the crisis started. These analysts at Credit for could not 274 00:19:01,520 --> 00:19:06,640 Speaker 1: get to the bottom of the of Agropos accounts. There 275 00:19:06,720 --> 00:19:10,000 Speaker 1: was always something that they could not explain in terms 276 00:19:10,040 --> 00:19:14,200 Speaker 1: of how to reconcile their numbers. And the company aptly 277 00:19:14,280 --> 00:19:18,919 Speaker 1: paid a few extra percentage points in in yield in 278 00:19:19,040 --> 00:19:23,439 Speaker 1: its bonds and its loans in order to get away 279 00:19:23,480 --> 00:19:27,919 Speaker 1: with that uncertainty over over the numbers. But in the 280 00:19:28,040 --> 00:19:32,800 Speaker 1: end this came back to bite them because the recoveries 281 00:19:32,840 --> 00:19:36,520 Speaker 1: for for investors may be very low. Well, I think 282 00:19:36,520 --> 00:19:38,800 Speaker 1: I know what Dan was maybe driving at here and 283 00:19:38,920 --> 00:19:41,760 Speaker 1: when Luca, Luca, when you talk about that, that reminds 284 00:19:41,800 --> 00:19:44,719 Speaker 1: me of Lehman Brothers nine years ago. And analysts were 285 00:19:44,720 --> 00:19:48,159 Speaker 1: saying pretty much the same thing. Couldn't reconcile the books together, 286 00:19:48,320 --> 00:19:53,400 Speaker 1: something wasn't quite right, didn't add up, and the result was, well, 287 00:19:53,440 --> 00:19:55,680 Speaker 1: we know it now. It was It's what happened in 288 00:19:55,680 --> 00:19:59,840 Speaker 1: two eight global financial crisis. Yasmina and Luca, thank you 289 00:20:00,080 --> 00:20:03,320 Speaker 1: much for joining us today. This was really informative and interesting. 290 00:20:03,760 --> 00:20:09,600 Speaker 1: Thank you, Thank you. Benchmark will be back next week 291 00:20:09,640 --> 00:20:12,200 Speaker 1: and until then you can find us on the Bloomberg terminal, 292 00:20:12,240 --> 00:20:15,000 Speaker 1: bloomberg dot com, or Bloomberg app, as well as on 293 00:20:15,080 --> 00:20:19,080 Speaker 1: Apple Podcasts, pocket Casts, and Stitcher. While you're there, take 294 00:20:19,119 --> 00:20:21,240 Speaker 1: a minute to rate and review the show. Some more 295 00:20:21,280 --> 00:20:23,919 Speaker 1: listeners can find us and let us know what you 296 00:20:24,000 --> 00:20:26,359 Speaker 1: thought of the show. You can follow me on Twitter 297 00:20:26,680 --> 00:20:31,359 Speaker 1: at Scott Landman Dan. You are at moss Underscore Echo 298 00:20:31,600 --> 00:20:34,320 Speaker 1: yas me Now you're at at j A s k 299 00:20:34,600 --> 00:20:38,040 Speaker 1: U z M A n O v I C and 300 00:20:38,440 --> 00:20:41,800 Speaker 1: Luca is at at l c A s I r 301 00:20:41,960 --> 00:20:46,119 Speaker 1: A g h I. Benchmark is produced by Sarah Patterson. 302 00:20:46,240 --> 00:20:47,920 Speaker 1: Thanks for listening, See you next time.