bloomberg news23 Jan 2014 14:37
Bloomberg News
NWR Bonds Slump as Blackstone to Help in Debt Restructuring (1)
By Krystof Chamonikolas and John Glover January 23, 2014
New World Resources Plc (NWR) bonds and shares tumbled on speculation the unprofitable Czech coal miner will reorganize its debt and sell new stock.
The company’s 275 million euros ($375 million) of unsecured notes due in January 2021 slumped 20 cents on the euro to 15 cents, lifting the yield to record 61 percent. Its 500 million euros of secured debt due May 2018 fell 13.5 cents to 59.5 cents, according to data compiled by Bloomberg.
NWR hired Blackstone Group LP to advise on a business overhaul to shore up its finances as it can no longer withstand a drop in coal prices, the Amsterdam-registered miner said late yesterday. The company said it hasn’t got an extension of an undrawn 100 million-euro credit line which expires on Feb. 7.
STORY: Why JetBlue Is Loving the Single Life
“The likely outcome, in our view, will be a debt-for-equity swap or a haircut for bondholders, followed by a capital increase,” Bram Buring, an analyst at Prague-based Wood & Co. brokerage, wrote in report to clients today. “The market may interpret this announcement as a prelude to a default.”
Wood has a sell recommendation on NWR shares with a price target of 11 koruna, according to the report. The stock fell 18 percent to 20.50 koruna by 11:33 a.m. in Prague, with volumes at 9.4 times the three-month daily average.
‘Further Deterioration’
NWR has been hurt by shrinking demand from steelmakers and a global glut of coal used to make electricity. The average negotiated price of coking coal, used in steelmaking, dropped 7 percent in the first quarter from the previous three-month period, the company said. It expects to significantly curb its “economically mineable” reserves, according to the statement. NWR also said it hired White & Case LLP as its legal adviser.
STORY: Can Daniel Dienst Turn the Martha Stewart Empire Around?
“NWR can’t risk any further deterioration of the market,” Chief Financial Officer Marek Jelinek said on a conference call yesterday. “Our balance sheet needs to reflect our cash generation potential in the current market.”
Majority shareholder BXR Group Ltd., controlled by Czech billionaire Zdenek Bakala, is prepared to invest new equity capital into a “revised and satisfactory capital structure,” NWR said. The company said it “will consider all available options” during the review of its balance sheet.
Komercni Banka AS, Societe Generale SA’s Prague-based unit, cut NWR shares to sell from hold today in a report from analyst Josef Nemy. The miner is “very likely” to issue new shares at a “significant discount” to the market price, he said.
STORY: A Thaw With the West Boosts Iranian Stocks
‘Debt Restructuring’
A