New World Resources Plc (NWR), the largest Czech producer of coking coal, agreed with lenders to amend financial covenants to its revolving credit facility after this year’s record losses.
The Amsterdam-registered company agreed with creditors that the financial covenants of its undrawn 100 million-euro ($135 million) facility won’t be tested until it expires on Feb. 7, 2014, it said late yesterday in an e-mailed statement. It’s the second time this year its debt covenants have been waived and amended.
Prices of coking coal began to plummet last year as clients such as ArcelorMittal (MT) and Evraz Plc (EVR) limited production because of smaller demand for steel from carmakers and other industrial companies. NWR posted a net loss of 315.4 million euros in the second quarter, on low commodity prices and falling demand from steelmakers, and announced an asset disposal program.
Any further borrowing must be approved by the creditors, the company said. Further conditions of the credit facility amendment include stricter financial reporting, limitations on dividend payments and a maximum net debt to 12-month earnings before interest, tax, depreciation and amortization of 5:1, according to the statement.
Moody’s Investors Service on July 24 cut the company’s rating to Caa1, nine steps below investment grade, from B2, citing declining coal prices and the prospect of “challenging market conditions” during the next 12 to 18 months. NWR’s debt will probably equal 10 times Ebitda by year end, up from 3.8 times Ebitda at the end of 2012, Moody’s said in July.
NWR has since announced the sale of its OKK coking plant unit for 95 million euros and said it will close down the loss-making Paskov mine by the end of next year. Paskov, one of the four mines NWR operates in the country, incurs an annual loss of about 1.5 billion koruna ($79 million) at current coking coal prices, the company has said.
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