New World Resources Plc (NWR) will seek ways to shore up its balance sheet in the coming months because it can no longer withstand the deterioration of the coal market with its 825 million-euro ($1.1 billion) debt load.
Majority shareholder BXR Group Ltd., headed by billionaire Zdenek Bakala, is prepared to invest new equity capital into a “revised and satisfactory capital structure,” Amsterdam-registered NWR said in a statement today. “The review will be focused on the group’s balance sheet and will consider all available options,” the company said.
NWR has been battling a drop in prices amid shrinking demand from steelmakers and a global oversupply of coal used to generate electricity. The average negotiated price of coking coal, used in steelmaking, dropped 7 percent in the first quarter from the prior three-month period, NWR said. Prices for the majority of the company’s expected 2014 production of thermal coal, burned in power plants, are down 4 percent from 2013, it said.
“NWR can’t risk any further deterioration of the market,” Chief Financial Officer Marek Jelinek said on a conference call today. “Our balance sheet needs to reflect our cash generation potential in the current market.”
The company is reviewing all its mines and expects a significant decrease in “economically mineable” reserves, according to the statement. A 100 million-euro revolving credit facility, which is undrawn, expires on Feb. 7 and won’t be extended, it said.
NWR hired Blackstone Group LP (BX) as its financial adviser and White & Case LLP as its legal adviser to assist in the review. The company has scheduled its 2013 earnings release for Feb. 13.
The company has said it will close its unprofitable Paskov mine at the end of this year unless the government takes it over or helps to subsidize its operations. It also agreed to sell its OKK coking plant last September for 95 million euros as part of an effort to reduce debt.
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