“Vila Oliva,” the largest minority shareholder with a 29 percent stake, is committed to backing the new restructuring plan for the “Simo Milošević” Institute in Igalo. They plan to engage in its recapitalization efforts, contributing up to seven million euros, as confirmed by the co-owner of “Vila Oliva,” Zarko Rakčević, in an interview with “Vijesti.”

The prior Restructuring Plan, which included the sale of various assets such as the children’s department, the skyscraper, the E department, and substantial land for residential and commercial development, was rejected in January. This was largely due to Rakčević’s opposition, as without his support, the state, holding 56 percent of the shares, lacked the necessary two-thirds majority to proceed with the decision.

Following Rakčević’s request, a revised Restructuring Plan will be presented at the Shareholders’ Meeting set for February 24. The new plan involves a greatly reduced asset sale—specifically, the transfer of the children’s department to the state for educational purposes, ensuring all shareholders participate proportionately in capitalizing the Institute to prevent the state from achieving a two-thirds majority on its own. Additionally, it proposes transferring land from the state back to the Institute, elevating the Institute to a four-star rating within four years, professionalizing its management, and optimizing employee numbers and expenses. This comprehensive effort is estimated to require 88 million euros, with 21.5 million euros urgently needed via recapitalization to address outstanding liabilities and avert bankruptcy.

“Vila Oliva” plans to acquire shares at a price of 155 euros through recapitalization, with the possibility of increasing its ownership by only 0.5 percent from its current 29 percent stake.

Saving the Institute is a Priority

Rakčević emphasized in a conversation with “Vijesti” that, as a significant minority shareholder, they will take every necessary step to prevent the Institute from facing bankruptcy while adopting a responsible management approach.

“We maintain that the Institute, which aids the rehabilitation and recovery of approximately five thousand Montenegrin citizens annually—among them around five hundred children—is crucial not just for public health but also for reintegrating numerous individuals into ordinary life. This has positive implications for their families and the state. We believe that the Institute’s owners, along with the majority stakeholders, are capable of continuing this honorable and socially responsible mission for the citizens of Montenegro requiring assistance. Simultaneously, we see the potential for the Institute to become a reputable and profitable rehabilitation center through effective management, upgrading to a four-star standard, and acquiring new medical equipment, thereby exiting its current financial losses. By modifying its operational practices, the Institute can successfully achieve both its health-oriented and economic objectives. This necessitates the appointment of capable and professional, rather than merely adequate, representatives to the governing bodies,” stated Rakčević.

He noted that, alongside the Government as the primary owner, they successfully averted bankruptcy this past summer by securing a five million euro interest-free loan for the Institute. They also highlighted the importance of implementing realistic pricing for funded patients.

“We advocated for adjustments to the restructuring plan, proposing a sixth strategic option to save the Institute and distribute financial responsibilities more equitably. With our proposed changes accepted in this revised plan, it was agreed that through recapitalization, which amounts to up to seven million euros—29 percent more than “Vila Oliva” already holds—we would address the Institute’s liabilities of 21.5 million euros. All shareholders are invited to contribute towards covering these losses. Throughout discussions, the public has been made aware of the various differences that we have articulated over the past months. Almost all of our suggestions regarding this sixth strategic option were adopted. The plan was amended to ensure that the principal building of the first phase of the Institute would not be sold. Additionally, we acknowledged the potential sale of the children’s department building strictly for educational purposes, in the community’s interest of Igalo and Herceg Novi. It was also agreed that there would be no residential development on land that should revert to the Institute, a decision supported by substantial evidence. “We reached a consensus that a public offer would be made to acquire shares held by remaining minority shareholders, as around 14.5% of the shares belong to them, ensuring the offer is extended to all,” Rakčević explained.

Commitment to Professional Management

He emphasized his commitment to insisting on professional management, ensuring transparency in all future restructuring initiatives, and overseeing investments.

“Each investment phase will undergo public tender processes in line with legal requirements, thereby guaranteeing that investment funds allocated to elevate the Institute to a four-star level will be optimally utilized through competitive bidding. Moreover, we propose establishing committees to oversee and supervise investment implementations involving representatives from both majority and minority shareholders, along with independent experts. Simply put, we have faith in the future of the Institute, recognizing the necessity of its services for Montenegro’s citizens, and we believe it is essential to understand that a shift in operational practices is vital, embracing the principles of responsible business conduct,” concluded Rakčević.

The main principles of the Plan comply with European standards regarding permissible state aid, allowing the state to cover up to 60 percent of the financial requirements for restructuring. In contrast, the Institute is expected to source the remaining 40 percent through asset sales and loans, alongside contributions from minor shareholders’ recapitalization.

The plan anticipates raising a total of 88 million euros, with allocations including 3.5 million for purchasing shares from minority shareholders, 56.5 million through multiple recapitalization phases, 13.5 million euros from asset sales, and 14.5 million derived from loans that the Institute is eligible for receiving only once state-owned land is reverted to its governance.

Out of the total 61.6 million euros earmarked for building renovations, 21.4 million is designated for settling debts, 1.4 million for upgrading the information system and marketing efforts, and 3.5 million for buying shares from minority owners.

Planned Sequence: Adoption of the Plan, Purchase of Small Shares, then Recapitalization

The restructuring plan outlines a sequence of steps aimed at rescuing the Institute. Initially, the adoption of the Restructuring Plan on February 24 is expected, following which minority shareholders can sell their shares via a public offering based on the proportions of potential buyers. Although the plan does not specify the buyout price for minority shareholders, it references “Vila Oliva”‘s previous offer from May, which included a 70 euro purchase price for shares from the Government or selling their shares to the state at 58 euros. Presently, the stock exchange price stands at 58 euros, and the nominal price for recapitalization measures is set at 154.9 euros, with a small shareholders group listing shares for sale at a price of 100 euros per share.

Once shares from interested minority shareholders are acquired, the Institute would move forward with a decision on recapitalization—conducting “one or more actions as needed to secure funds necessary to implement specific measures identified in the Restructuring Plan.”

This entails executing an urgent capital increase of at least 21.5 million euros, reflecting the current obligations of the Institute, to avert bankruptcy. The government is expected to contribute approximately 14 million euros, while “Vila Oliva” could provide up to seven million, alongside potential involvement from additional stakeholders.

“Should minority shareholders opt not to participate in the recapitalization process, any shortfall in their contributions would be accommodated by the Institute, instead of those minority shareholders,” the Plan specifies.

The Government Moves Away from Major Asset Sales; First Phase Could Transform into a Luxury Hotel

One proposal included in the Plan entails selling significant Institute assets for a total of 37 million euros if sufficient capital isn’t raised through recapitalization.

This involves selling the old spa location for 7.5 million euros, land beneath the second phase for 2.7 million, properties on Šištet hill for 17.8 million, land behind Tito’s villa for 3.8 million, and the children’s wing for 4.9 million.

Critically, the new plan eliminates any potential sale of the first phase building of the Institute from its asset disposition.

However, there is the option to convert this building into a high-end luxury hotel through collaboration with a private partner, which is described as “a model successfully implemented by competing European rehabilitation centers.”

“This investment will be facilitated by establishing a special purpose company wherein the Institute contributes the value of its existing structures and land,” the proposal states.

The primary structure (Main Building, E Department, and Soliter) would have a private partner invest in transforming it for new purposes. As a result, the private partner would retain majority ownership, while the Institute would become a minority stakeholder in the managing company of the hotel complex,” the alternative portion of the plan delineates.

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