Creditors of insolvent Czech miner OKD voted to pursue restructuring of the company at a crunch meeting on August 11.
The creditors’ decision is welcome news for the government, with whom they spent the early months of 2016 playing chicken over the future of the company. While Prague has accepted that OKD is a lost cause in the long run, it is keen to avoid a sudden shutdown of OKD's mines in the east of the country, which employ around 13,000.
“This is very positive news for OKD, for employees and hard coal mining in the Ostrava region," a company spokesman said, according to Reuters.
Only one of the 100 creditors present voted for the alternative - to put the company into bankruptcy proceedings. Under that scenario, the company would be split up and its assets sold off, but shareholders and creditors would be unlikely to walk away with much compensation.
OKD management has been tasked with drafting a restructuring plan to be submitted to the court and creditors. The insolvency manager will remain Lee Louda, who has angered the creditors since taking control of the company in May. Judge Petr Kula said the court will approve the reorganisation shortly, according to CTK.
The reorganisation plan will pave the way for the government to provide a CZK700mn (€26mn) loan to the struggling miner, Industry Minister Jan Mladek said. OKD management estimates the company may return to profit by the end of 2018, by which time the unprofitable Darkov and Paskov mines will be shut down.
OKD, which was declared insolvent on May 9, has over 550 creditors who have claimed more than CZK20bn in total, compared to assets of less than CZK7bn. However, recognised claims so far amount to CZK3bn. Rail freight carrier Advanced World Transport is the biggest OKD creditor with around CZK460mn in recognized claims.
A day before the creditors’ meeting, the Ostrava Regional Court rejected claims related to bonds issued by OKD and former parent New World Resources (NWR). The bulk of the claims were put forward by Citigroup as the lead agent for Ad Hoc Group (AHG), the trio of creditors that until the insolvency had controlled the miner via a conversion of bonds to equity.
AHG had spent most of the time since controversial oligarch Zdenek Bakala quit NWR playing a game of chicken with the Czech government, threating to pull the plug on the company if it did not get a bail out. However, Prague has stuck to its guns, a stance that appears, with the vote for restructuring, to have been vindicated.