New World Resources Plc shares and bonds tumbled after the unprofitable Czech coking-coal producer said its attempts to sell a mine have not succeeded and as Standard & Poor’s lowered its credit rating.
The stock slumped 14 percent, the most since June 20, to 18.80 koruna by close in Prague, extending this year’s plunge to 81 percent and trading near its record-low 17.75 koruna reached on June 27. Yields on NWR’s notes due in January 2021 jumped 140 basis points, or 1.4 percentage point, to 34.91 percent.
NWR, which has been cutting costs and preparing asset sales amid falling demand for coal from steelmakers, may temporarily or permanently shut down its Paskov mine as its disposal is “unlikely at present,” the company said in a statement today. A failure to raise money through divestment may prompt the miner to sell new shares, Josef Nemy, an analyst at Komercni Banka AS in Prague, wrote in a report to clients today.
“The news confirmed our concern that NWR will find it hard to sell its assets, and is significantly increasing the risk of a new share issuance at a discount to the market price,” said Nemy, who has a sell recommendation on the company.
S&P downgraded NWR to B-, its sixth-lowest non-investment grade, with a negative outlook from B in a report on July 12 after the stock market closed, citing reduced forecasts for coking-coal prices and the company’s cash position. It revised its assessment of the Czech miner’s business risk profile to “vulnerable” from “weak” and its liquidity to “less than adequate” from “adequate.”
“The stock was further hurt today by S&P’s rating cut,” Nemy said.
NWR said in May it was seeking a buyer for its OKK coking unit and that it may sell or close some mines after it posted a first-quarter loss as a recession in the Czech Republic and the euro area damped demand for coking coal. Benchmark contracts for the commodity delivered to China have fallen 18 percent this year to $130 a metric ton, data compiled by Bloomberg show.
“The negative outlook reflects the possibility of a downgrade in the coming quarters if NWR fails to sell its coke facility and secure a covenant waiver from its banks by early 2014,” S&P wrote. “A downgrade could also occur if NWR’s cash burn continues in the second half of 2013 because of weaker prices, its inability to fully meet its cost-cutting targets, and high restructuring costs.”