- Bankruptcy would lead to 13,000 miners losing their jobs
- Restructuring agreement needed by Wednesday to avoid default
The Czech government said the owners of troubled coal miner New World Resources Plc were using the prospect of an expensive bankruptcy to blackmail it on the eve of a crucial meeting in which the two sides will seek a way to avert the company’s collapse.
Ad Hoc Group, NWR creditors including Ashmore Investment Management Ltd. that assumed control of the troubled company in February, said the social fallout from an “uncontrolled” bankruptcy could cost the Czech state 33 billion koruna ($1.4 billion), while an orderly phasing out of operations could limit the cost to 17 billion koruna, according to a Deloitte LLP study it commissioned. That is an “unacceptable pressure” on the government, Industry and Trade Minister Jan Mladek told reporters.
“We agreed that we won’t let ourselves be blackmailed by someone saying we can save 16 billion koruna if we cooperate with them,” Mladek said after a government meeting. “On the other hand, considering how big and important the company is, we don’t have a choice but to negotiate with the owners and the bondholders.”
The last Czech producer of coking and thermal coal is facing default less than two years after it restructured its debt and received a cash injection from investors including its founder Zdenek Bakala. He became one of the richest Czechs after buying up the communist-era mines and floating them on the Prague and London stock exchanges in 2008. Like many European peers, the company fell victim to the unprecedented slump in commodity prices.
Ad Hoc Group, which became the majority owners after Bakala left the company in February, needs to reach a deal with the government on the company’s restructuring by April 13 to avoid default, group spokesman Roman Parik said by phone. Failure to reach a deal with the government would put 13,000 miners and 8,000 affiliated workers out of work in the eastern region of Moravia-Silesia, which has the nation’s second-highest unemployment rate.
“The situation is critical,” Parik said. “An insolvency would be the worst possible fate from an economic, social and fiscal point of view.”
NWR shares fell 6.3% percent to 0.15 koruna in Prague. The stock peaked shortly after its May 2008 initial public offering and has since plunged more than 99 percent. Coal for next year in northwest Europe has lost 1.7 percent this year after slumping 39 percent in 2015, according to broker data compiled by Bloomberg.
The company already announced it will shut down its most unprofitable asset, the Paskov mine, this year, cutting 1,300 jobs. Ad Hoc Group, which also includes M&G Investment Management Ltd. and Gramercy Funds Management LLC, controls 60 percent of NWR’s voting rights.
A group of Czech businessmen headed by Petr Paukner have offered to buy some NWR assets on the condition that the company starts insolvency proceedings, Mladek said. The government will meet with them by the end of next week, he said.