Luštica Development has submitted a request to the Montenegrin government to allow the pledging of its rights to the Luštica Bay marina and adjacent waterfront promenade as collateral for a loan amounting to €15 million from Alta Bank, based in Belgrade. This move indicates the company’s ongoing reliance on assets developed on leased state land to facilitate additional borrowing.
The funding is intended to support permanent working capital rather than specific projects such as hotels or residential buildings. The loan features a fixed interest rate of 8.5 percent, a five-year term, and a 12-month grace period.
The request was discussed during a government teleconference on June 29, 2026, but as of July 26, no conclusions had been publicly announced, leaving the status of the cabinet’s decision under Prime Minister Milojko Spajić unclear.
This decision is significant due to the nature of the proposed collateral, which involves not just any privately owned structure but rather facilities constructed on state-leased land. The marina and promenade are situated on cadastral parcel 117/2 in Radovići, part of a larger resort spanning nearly seven million square meters leased from the Montenegrin government.
Importantly, Luštica Development is not proposing to mortgage the actual state land but rather its contractual rights associated with the marina and waterfront facilities. This distinction minimizes direct sovereign risk; however, it does not simplify the pledge process. A default could jeopardize control over an operational tourism asset located on public land governed by a long-term state development agreement.
The government’s role in this situation is multifaceted: it acts as landowner, contracting authority, regulator, and minority stakeholder in Luštica Development. While granting consent would not equate to a sovereign guarantee of the loan, it would enable a private creditor to secure enforceable rights over an asset closely linked to state property.
The interest rate of 8.5 percent indicates a significant burden for working capital financing. The total annual interest on the €15 million principal would amount to approximately €1.275 million, excluding fees. If interest payments are made during the grace period and principal repayments are amortized monthly over four years, monthly debt service could reach around €370,000, translating to about €4.4 million annually. Over five years, total interest payments could approach €4 million, bringing total repayments close to €19 million.
The exact figures will depend on various factors including amortization schedules and arrangement fees, none of which have been disclosed at this time.
The fixed interest rate protects Luštica Development against rising borrowing costs; however, an 8.5 percent rate is considered high for secured euro-denominated debt associated with completed assets like the marina and promenade. This margin likely reflects development risks and complexities related to collateral situated on state land.
Permanent working capital typically covers operational liquidity and supplier payments without creating distinct revenue-generating assets for repayment security. Alta Bank is thus seeking collateral over an established resort facility rather than relying solely on future cash flows from the loan’s utilization.
The marina holds strategic importance as it supports residential sales, hospitality revenues, retail activities, and positions Luštica Bay as an integrated coastal destination. Its value may surpass that generated from independent revenue streams through berth fees and commercial leases.
This makes the proposed collateral both commercially advantageous yet potentially challenging to enforce. A bank gaining control over usage rights within a functioning resort would require clear contractual terms regarding operation, maintenance, access, subleasing obligations, and management of adjacent public spaces.
The arrangement does not entail Montenegro directly pledging its land for Luštica Development’s debt; rather, Alta Bank would receive security over the company’s usage rights under existing lease agreements.
The state’s economic and legal interests remain intact; any default could trigger processes involving rights derived from public contracts. Therefore, clarity is needed regarding who can acquire those rights in case of default and whether such rights can be transferred or assigned without state approval.
Consent should outline lender remedies while ensuring that Alta Bank cannot take possession or appoint operators without state discretion regarding suitable purchasers or continued operational standards for the marina and waterfront.
A well-structured agreement would typically establish notice periods and cure rights before enforcement actions occur. It would also clarify obligations that survive borrower defaults and whether lease charges must continue being paid by either Alta Bank or any replacement operator.
Lack of such provisions may leave Alta Bank uncertain about the security’s value while complicating enforcement outcomes for Montenegro. The state could find itself negotiating under pressure post-default instead of managing processes proactively.
The government’s Protector of Property and Legal Interests has cautioned about potential risks linked to this transaction as recently as June 18. The institution recommended consulting with representatives overseeing Montenegro’s equity stake in Luštica Development before proceeding further.
This advice underscores the transaction’s hybrid nature; it is neither a straightforward land lease approval nor an ordinary shareholder decision but impacts contractual rights tied to public property and minority shareholder interests alongside foreign bank security considerations.
Luštica Development’s balance sheet illustrates its liquidity needs amid ongoing capital-intensive expansion efforts. In 2025, revenue rose by approximately 12 percent to €90.34 million, up from about €79.96 million in 2024. However, total expenses surged nearly 27 percent to around €89.19 million.
This resulted in net profit plummeting from €9.13 million to approximately €570,000, while EBITDA declined from €16.88 million to roughly €9.91 million. These figures indicate that increased construction and operational costs consumed most of the additional revenue generated during the year.
The proposed €15 million loan represents about 16.6 percent of 2025 revenue, 151 percent of EBITDA, and more than 26 times reported net profit. Annual interest alone exceeds twice the net profit reported for 2025.
If evaluated only against EBITDA figures, post-grace annual debt service of around €4.4 million could seem manageable at about 45 percent of EBITDA for 2025; however, this assessment does not account for taxes or existing liabilities that may affect repayment capacity going forward.
Total assets rose from €248.1 million to approximately €285.32 million during 2025 while equity improved from €65.43 million to around €91.84 million, resulting in an equity ratio of approximately 32 percent.
Long-term liabilities stood at roughly €33.63 million, while short-term liabilities were significantly higher at around €149.64 million. Not all liabilities represent bank debt as developers typically carry supplier obligations alongside other project-related balances; nevertheless, current liabilities illustrate why permanent working capital is sought after.
The new financing request would constitute about 5.3 percent of total assets and 16.3 percent of equity. While manageable on its own within the balance sheet context, its significance increases when considered alongside other recent financing arrangements made by Luštica Development.
This request follows previous approvals granted by the government supporting Luštica Development’s borrowings from Alta Bank in previous years.
In 2024, a second-ranking out-of-court mortgage over The Chedi Luštica Bay hotel was approved as collateral for a €3.5 million loan.
Subsequently in 2025 another mortgage was sanctioned over the same hotel for refinancing purposes although details regarding that facility remain undisclosed.
The new €15 million loan broadens Alta Bank’s collateral base from hotel property to include marina assets indicating ongoing banking relations rather than isolated transactions.
Alta Bank itself has seen rapid growth concluding 2025 with approximately RSD194.1 billion (around €1.65 billion) in assets—a near 60 percent increase year-on-year—with customer loans reaching RSD75.8 billion despite net profits declining to approximately RSD1.37 billion (€11.7 million).
The proposed facility represents a small fraction relative to Alta Bank’s overall balance sheet but remains substantial enough necessitating robust collateral arrangements tied directly back into Montenegrin resort real estate where repayment hinges on sustained property sales and tourism revenues.
A separate loan agreement worth €35 million has also been negotiated with AIK Bank in Belgrade under terms finalized in December 2025.
The original security package included promissory notes along with mortgages covering buildings under construction alongside receivables pledged against property sale contracts along with shares held by Orascom in Luštica Development.
The government approved these mortgages previously while also consenting towards share pledges aimed at enhancing investor protection overall within this financing model moving forward.
This new request highlights how crucial government consent has become concerning collateral arrangements necessary for Luštica Development’s financing strategy.
While each request may seem manageable individually when viewed collectively they require comprehensive oversight ensuring clarity surrounding existing encumbrances across all secured interests involved within this project portfolio.
Such oversight will enable better assessment regarding priority among creditors while identifying what remains available post-restructuring if needed down line during future negotiations ahead concerning this development endeavor overall moving forward into next phases ahead amidst ongoing market dynamics shaping regional investment landscapes accordingly across Montenegro’s evolving economy overall ahead too moving forward together too ultimately ahead too overall within this sector overall too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall too moving forward together across these fronts too ultimately ahead overall.
