Billionaire Threatening Liquidation Spurs Record NWR Selloff

Czech billionaire Zdenek Bakala is going all-in to salvage what’s left of coal miner New World Resources Plc as he asks investors to choose between a severe haircut and bankruptcy, triggering a record stock slump.

The company, controlled by Bakala’s BXR Mining NV, is threatening bondholders and shareholders with the fire sale of almost all assets unless they approve a restructuring plan that would increase the number of shares 25 times and force creditors to accept a reduction of their debt holdings.

NWR invited offers for its mining units OKD AS in the Czech Republic and NWR Karbonia SA in Poland yesterday if its business-overhaul plan fails. Proceeding with the sale “could leave certain categories of stakeholders with minimal or no recoveries,” the company said. The shares slumped 26 percent yesterday and a further 39 percent today in Prague.

“The pressure on bondholders is clearly growing, and they’re running out of time,” said Marek Hatlapatka, an analyst at Brno-based brokerage Cyrrus AS. “It will be very difficult to attract any acceptable offers for the assets.”

The company said it will scrap the auction if the required majority of bondholders and shareholders accept its altered debt-restructuring plan, first announced a month ago. It has named PricewaterhouseCoopers LLP as a prospective insolvency administrator in case the plan isn’t accepted.

‘De-Facto Liquidation’

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, said yesterday. “In that case, existing shareholders couldn’t expect to get a portion of the sale proceeds.”

NWR posted six straight quarterly losses after coal prices fell and the Czech government forced the company to keep its money-losing Paskov mine open longer than planned.

Bakala, whose worth is estimated at about $1 billion by Forbes, gained control over the Czech mining company OKD, the biggest employer in the industrial eastern Ostrava region, in 2004 and then founded NWR, which sold shares in an initial public offering in May 2008. The stock price peaked later that year and has since plunged 99 percent to 4.05 koruna today.

The billionaire drew fire from labor unions and the government for a plan to close Paskov. In April, NWR agreed to keep the shaft, which employs 3,000 workers and hits the company with an $80 million loss each year, open until 2017.

‘Close to Zero’

Under the revised program, bondholders would accept a haircut and NWR would sell new rights, increasing the number of shares. Bakala’s BXR, which owns a majority of NWR, would buy 75 million euros ($102 million) of the new stock.

NWR’s unsecured Eurobonds due January 2021 fell, lifting the yield 163 basis points to 62.48 percent. The rate on the secured notes maturing in May 2018 was little changed at 19.95%.

The original version of the rescue program published on June 2 prompted Standard & Poor’s three days later to downgrade the company’s long-term credit rating to CC, two steps above default. NWR may be cut to “selective default” and its bonds to “default” if creditors accept the plan or the company misses coupon payments in July or November, S&P said.

Almost 4.7 million NWR shares changed hands today in Prague trading, 21 times the daily average in the past three months, according to data compiled by Bloomberg. The stock market now values the company at 1.1 billion koruna ($53 million) compared with its debt load of 825 million euros.

Yesterday’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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