Czech hard coal miner OKD, the main asset of Prague- and London-listed energy group New World Resources (NWR), filed for insolvency on May 3. OKD said, however, that it aims to restructure and maintain operations.

OKD said in the 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, CTK reports. The company employs 13,000 people in the economically depressed eastern region.

CEO Dale Ekmark said in a statement that the miner has insufficient resources to repay its outstanding debts. “However, over the course of May, we should receive payments from our customers that should be sufficient to cover the minimum expenses necessary to continue with our daily operations, including unpaid salaries to employees.”

Czech Prime Minister Bohuslav Sobotka announced on Twitter that he would convene a full cabinet meeting on May 4 to discuss the development. The government has consistently refused to bail out NWR, but has said it will support OKD’s redundant miners. 

Meanwhile, private equity fund  Arca Capital, which holds more than 3.4% in NWR said on May 3 it has now carried out a threat made in February to file suit against NWR and companies that helped it list in 2008. The shares have become practically worthless following a restructuring last year.

Since early December, NWR has been in discussions with stakeholders - including the Czech government and owner Ad Hoc Group (AHG) - a trio of bondholders and creditors - regarding a restructuring of liabilities and the provision of vital additional liquidity. AHG and Prague have been engaged in a game of chicken throughout, as AHG has pushed for an agreement on state aid, warning of an “uncontrolled bankruptcy” that could knock up to 0.4 percentage points from Czech GDP and cost the state €1.2bn.

Ministers have consistently rejected what they called attempted “blackmail” and the arbitrary deadlines set by the creditors. The government maintains, however, it will help ensure a smooth shutdown of the mines.

“No further meaningful progress has been made in the past few days,” NWR said in a regulatory filing announcing the insolvency petition. “Information provided to the Czech government and the AHG to date gives a clear picture: OKD’s financial position is very weak and it urgently requires an external injection of money to be able to continue trading and to meet its financial liabilities, including paying its workers.”

AHG and its advisers remain willing to pick up discussions with the government at any time to meet and try to find a solution that is legally permissible in the wake of the petition, spokesman Roman Parik said, according to CTK. 

A default by NWR is “highly likely” in the near future, Moody’s Investors Service wrote on April 28, cutting the company’s credit rating by two levels to 'C', the agency's lowest rating and 11 notches below investment grade. The group’s €300mn worth of senior secured notes due in 2020 were cut to Ca from Caa2.

Even if a restructuring deal for OKD were to be agreed at the last minute, Moody’s said, NWR’s ability to fund operations through to completion of sufficient financial restructuring is uncertain and highly dependent on the timeframe for securing such an agreement.