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Czech billionaire comes to NWR’s aid

World Coal,

Unprofitable coal mining company New World Resources (NWR), has been lent a helping hand by Czech billionaire, Zdenek Bakala. Bakala has agreed to restructure the debt of NWR by doubling down on a company that, in its heyday, made him one of the country’s richest men.

The junk-rated miner’s secured bonds surged their most ever yesterday after investors including Bakala’s BXR Group pledged to provide € 185 million (US$ 252 million) of additional capital for new shares. If approved by the required majority of bondholders, the deal will help cut NWR’s debt to € 450 million from € 775 million and extend debt maturity to 2020.

NWR has experience six consecutive quarterly losses from a continuous slump in coal prices. The miner has faced extended pressure from the Czech Government to halt its plan to close its money losing Paskov mine. In April, NWR agreed to keep the coal shaft, which employs 3000 workers and hits the company with an US$ 80 million loss each year, open until 2017.

“BXR is clearly expecting prices of coal to rise, otherwise they wouldn’t be doing this,” Petr Bartek, an analyst at Erste Group Bank AG (EBS) said. “But let’s not forget that, given today’s coal prices, the company is still cash-flow negative.”

Who is Bakala?

BXR Group, Bakala’s investment company, will inject € 75 million in exchange for new NWR shares, while a further € 50 million will be invested by other bondholders. Certain bondholders will also back a € 35 million super senior credit facility, the company said.

Bakala gained control over the Czech mining company OKD, the biggest employer in the industrial northeastern Ostrava region, in 2004 and then founded NWR, which sold shares in an initial public offering in May 2008. The stock price peaked later that year and has since plunged 97%.

Bakala is not thought of fondly by many Czech citizens, least of all union members.

The billionaire drew fire from both the labour unions and the government for a plan to close the Paskov mine, because the Ostrava region where it is located has one of the highest unemployment levels in the country. Bakala has also been criticised by Czech politicians for his purchase of apartments in Ostrava, mostly housing miners, and reneging on a promise to sell them at a controlled price to their long-term tenants.

Cutting costs

As prices of coal continued to slump, NWR announced a cost-saving plan last year and sold its OKK coking plant for 95 million euros. The company also mothballed its Debiensko project in Poland until prices of coal recover.

The NWR restructuring proposal needs approval from 75 percent of bondholders by value and 50 percent of those present and voting for each class of creditors, NWR spokesman Joe Cook in Prague said by e-mail yesterday. The plan is currently supported by the holders of more than 56 percent of the secured debt, 25 percent of the unsecured securities and 64 percent of shares, he said.

“It’s not sure that the proposed transaction will be realised given that the company needs an approval from 75 percent of bondholders in each tranche,” Erste’s Bartek said. “We keep our cautious stance toward NWR.”

Edited by Sam Dodson

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