A court declared Czech hard coal miner OKD bankrupt on May 9. The move leaves creditors two months to file claims, with a meeting set for August 10. Meanwhile, the future of the company’s 13,000 or so employees rests with the state, with the court saying OKD could be broken up or restructured.
New World Resources (NWR), the holding that owns OKD, announced on May 3 that it had filed for insolvency of the key unit OKD, and the following day suspended trading in its shares in London, with Prague and Warsaw following. The IPO of NWR in 2008 was formerly the biggest on the Czech bourse; NWR has said investors are unlikely to see any return.
The bankruptcy comes after months of tussle between NWR owner Ad Hoc Group (AHG) – comprising a trio of bondholders and creditors - and the Czech government. The pair has been engaged in a game of chicken, as AHG pushed for an agreement on state aid, warning that an “uncontrolled bankruptcy” that could knock up to 0.4 percentage points from Czech GDP and cost the state €1.2bn.
Prague said it would not respond to "blackmail" or bail out the shareholders. However, it maintains it will help smooth the process of closing down the mines, which employ around 13,000 in the depressed industrial east of the country. OKD said in the insolvency petition submitted at the regional court in Ostrava that it has debts of at least CZK17bn (€629mn) to around 650 creditors, but assets of less than CZK7bn.
NWR has maintained throughout the insolvency process that it could yet restructure OKD and bid to survive until European coal markets revive. However, that now appears impossible under current ownership. While other suitors are reported to be sniffing around, the state remains the main hope for the workforce.
The court in Ostrava named Lee Louda from the Institute of Restructuring and Insolvency at the Prague School of Economics as administrator. A court spokeswoman said that there could be a restructuring of the company or a sell off of assets, according to Radio Praha.
With the company going under, the government will be obliged to take over the payment of wages and severance pay. Industry Minister Jan Mladek has said OKD will run out of cash in June.
Moody’s Investors Service announced on May 9 that it has downgraded the probability of default rating (PDR) of NWR to D-PD from C-PD, while the corporate family rating (CFR) has been affirmed at C. Moody's also downgraded the rating on the company's €300mn in senior secured notes due in 2020 from Ca to C. Moody's has now withdrawn all NWR's ratings.
The rating agency said its move follows the move by NWR to file for the insolvency of OKD. The Czech miner was the only operating and trading subsidiary of the NWR group. Moody’s says it “expects that this administrative process will ultimately result in the liquidation of OKD and the entire NWR group”.
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