OKD faces uncontrolled insolvency, Czech government to meet owners this week

Ad Hoc Group (AHG), which has become the 60% owner of New World Resources (NWR), is pressuring the Czech government to swiftly reach an agreement on financial support for its subsidiary OKD. If no agreement is reached this week, OKD reportedly faces uncontrolled insolvency.

„The restructuring proposal requires the support of all parties, including the government. To prevent uncontrolled insolvency, a solution and funding sources for the company from the end of April need to be found as early as next week,“ AHG said in its Sunday statement.

The government has been reluctant to provide aid to hard-coal producer OKD, whose previous owners paid out dividends, loaded the company with debt and spun off some of its assets. At the same time, however, it fears that the collapse of a company directly employing 13,000 people, as well as others indirectly, could have an adverse impact on the economy. OKD is the sole producer of hard coal in the Czech Republic.

AHG's proposal is for the rescue of OKD to be co-financed by the state. According to an AHG spokesperson, this would save at least 33 billion crowns compared with a potential uncontrolled insolvency.

Finance Minister Andrej Babiš said last week that options for state assistance include buying NWR shares and debt, creating a joint venture or another form of cooperation. The government has not yet decided on any specific approach.

„I would recommend the option of clearing the company of all its liabilities and long-term contracts, which are probably unfavourable,“ Babiš added, saying this was the best option provided the company continues operating and employees' jobs are not at risk.

If OKD miners were ultimately laid off, according to Minister Mládek, some of them could be hired by the state-owned company DIAMO, which manages mined-out pits in the Moravian-Silesian Region. The state could provide a temporary financial allowance to miners who did not find new jobs.