NWR Falls to Record After Filing for Creditor Protection

New World Resources NV, the Czech miner struggling to restructure its debt, fell to a record low after it filed for protection from creditors in the U.S. and warned that first-half revenue would decline.

The shares were down 32 percent to 2.60 koruna at 1:31 p.m. in Prague, the lowest since the stock started trading in May 2008. In London they fell 21 percent to the record low of 8.50 pence.

The Amsterdam-registered company is asking shareholders and bondholders to accept a restructuring that would cut the company’s debt by 45 percent and increase the number of shares 25 times. Its total debt of 811 million euros ($1.1 billion) is 28 times its current market capitalization.

“This will remind investors that the dilution of shares will be gigantic and may put further pressure on the shares,” Josef Nemy, an analyst at Komercni Banka AS in Prague, said in a note today.

NWR filed under Chapter 15 of the U.S. Bankruptcy Code today in Manhattan on behalf of a London-based unit. Under Chapter 15, a company can block lawsuits and organize creditors in the U.S. while conducting its principal reorganization in another country.

On July 29, A U.K. court ordered NWR creditors to vote on the 825 million-euro restructuring plan that will help the Czech parent avoid bankruptcy. Bondholders are scheduled to vote on Aug. 29 under a U.K. legal procedure known as a scheme of arrangement.

Coal Prices

First-half revenue will fall on lower sales and a continuing decrease in coal prices, the Amsterdam-registered company said. Earnings before interest, tax, depreciation and amortization in the first six months increased, compared with the year-ago period, after NWR reduced mining costs, according to a regulatory statement late yesterday.

The operating loss was “materially reduced” as last year’s impairment charge wasn’t repeated and because of other factors, according to the miner, which will report full first-half earnings on Aug. 21. The company will hold an extraordinary general shareholder meeting on Aug. 20 to vote on the restructuring plan.

Czech billionaire Zdenek Bakala, the main shareholder of NWR, has threatened to sell almost all of NWR’s assets if investors fail to accept the restructuring scheme.

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 more than 99 percent.

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