14th Apr 2016 10:27
LONDON (Alliance News) - New World Resources PLC Thursday said its lenders have agreed to give the company more time to strike a binding deal regarding its restructuring plans with the government in the Czech Republic.
New World shares were up 11% to 0.450 pence per share on Thursday morning.
New World had already said the majority of lenders under its super senior credit facility agreed to a standstill and temporary waiver back in February to extend it to Wednesday, but this has now been extended further until April 22, or next Friday.
The terms of the standstill agreement are set to remain in place until the end of July this year, but only if certain milestones are made by New World as it continues to try to restructure the company.
The lenders wanted New World to have signed a non-binding agreement with the government of the Czech Republic by Wednesday, approving the company's plan to restructure the business. However, the company has not managed to do this as of yet and that deadline had already been extended from the end of March.
However, the other way New World can achieve the required progress to gain the ongoing support from its lenders is still in play. If New World can sign a binding agreement with the government by the end of this month, then the lenders are likely to continue supporting the business.
"The group is in constructive discussions with certain key stakeholders, including its noteholders and shareholders and the Czech government, regarding a restructuring of the group's financial indebtedness," said New World.
"In light of progress made to date and the desire of all parties to work together towards reaching a binding agreement on commercial terms on or by April 30, 2016, the requisite majority of lenders under the super senior credit facility have agreed to extend the date for satisfaction of the first milestone," the company added.
New World is restructuring the business and negotiating terms with its lenders following a disastrous 2015 that plunged the business firmly into the red as New World reported a EUR223.6 million pretax loss, swinging from a EUR25.2 million profit the year before.
Although the company managed to increase its profitability by improving its gross margin to offset a fall in revenue, the main cause of that huge loss last year was the absence of a huge gain booked in 2014 from its capital restructuring not being repeated in 2015.
However, the main concern is over the near term, as New World has already said it expects to book losses in 2016, 2017 and 2018 as it continues to battle falling commodity prices. The company launched a strategic review, including a restructuring, late last year, the costs of which will contribute to those losses over the next several years.
New World Thursday said its immediate focus is on securing a viable business for the group that includes obtaining a portfolio of cash-generative mines, restructuring its capital structure to allow the company to be sustainable even at lower commodity prices and on securing "clarity for employees".
Late last year, New World said it will close down two of its mines at a cost of around EUR100.0 million, initially closing the Paskov and Lazy mines in the Czech Republic by the end of 2017, leading to an "employee-restructuring", which will cost the company between EUR85.0 million and EUR100.0 million overall.
Over 6.0% of its workforce lost their jobs in 2015, bring New World's overall headcount down to 13,816 at the end of 2015.
On Tuesday, New World said it managed to increase thermal and coking coal production in the first quarter of 2016 to 1.9 million tonnes of coal from 1.8 million tonnes a year earlier, and said coking coal sales had risen, but confirmed suspicions by revealing average prices were down to USD76 per tonne from USD90 per tonne a year earlier.
Thermal coal sales were also up year-on-year, but once again prices had dropped to EUR47 per tonne from USD56.
New World said back in February it was expecting coal sales to rise by around 9.0% this year after its inventory rose 11%, giving it more product to sell. At the end of December, New World had 742,000 tonnes of coal stockpiled.
"While significant progress has been made to date and parties are committed to moving forward, there is no guarantee that a refinancing or restructuring can be achieved or of the terms on which it could be achieved," said New World.
By Joshua Warner; [email protected]; @JoshAlliance
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