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NWR Falls as Billionaire Bakala Threatens Liquidation

New World Resources Plc slumped to a record low as the unprofitable Czech coal company said it wants to sell most of its assets, boosting speculation it will go out of business.

NWR is inviting offers for its mining units OKD AS in the Czech Republic and NWR Karbonia SA in Poland, the company controlled by billionaire Zdenek Bakala said in a statement today. It will scrap the transaction if the required majority of bondholders and shareholders accept a business-restructuring plan, NWR said. It has named PricewaterhouseCoopers LLP as a prospective insolvency administrator.

The sale “would represent the de facto liquidation of the company,” Josef Nemy, an analyst at Komercni Banka AS in Prague who has a sell recommendation on the stock, wrote in a report to clients today. “In that case, existing shareholders couldn’t expect to get a portion of the sale proceeds.”

NWR tumbled 26 percent today to 6.65 koruna, the biggest drop on record and the lowest close since trading started in May 2008. The stock has retreated 72 percent this year, valuing the company’s equity at 1.8 billion koruna ($90 million), compared with its debt load of 825 million euros ($1.1 billion).

Under the revised program published today, bondholders would accept a haircut on their holdings and NWR would sell new equity rights to some existing shareholder and bondholders, increasing the number of shares 25 times. Bakala’s BXR Mining NV, which owns a majority of NWR, would buy 75 million euros ($102 million) of the new shares, the company said.

‘No Recoveries’

The disposal of OKD and Karbonia is part of “contingency planning,” as there is “no certainty” the amended debt-revamp program will be implemented after an original June 2 proposal failed to get enough support from stakeholders, NWR said today.

“This could leave certain categories of stakeholders with minimal or no recoveries,” the company said. “In light of this consequence, the board repeats its recommendation to support the proposed consensual transaction as it takes into account the interests of all stakeholders.”

NWR’s secured senior Eurobonds maturing in May 2018 gained today, cutting the yield by 83 basis points to 19.95 percent. The rate on the unsecured notes due January 2021 rose 79 basis points to 60.53 percent, data compiled by Bloomberg show.

‘More Willing’

Bakala, whose worth is estimated at about $1 billion by Forbes, drew fire from labor unions and the government for a plan to close its Paskov mine in the eastern Czech Republic. In April, NWR agreed to keep the shaft, which employs 3,000 workers and loses $80 million each year, open until 2017.

“The government can hardly get involved in negotiations that NWR is now holding with its creditors,” Prime Minister Bohuslav Sobotka told reporters in Prague today. “I see NWR’s statement from today as some form of pressure on creditors, to make them more willing to reach an agreement.”

Today’s proposal indicates NWR would issue shares at about 0.65 koruna each instead of an estimated 9 koruna under the original plan, according to Nemy’s calculations.

“The value of NWR shares is, in our opinion, close to zero,” he said.

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