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NEW WORLD RESOURCES

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New World Resources : Update on the OKD Insolvency

08/08/2016 | 11:32am EDT

Amsterdam, 8 August 2016

Update on the OKD Insolvency

New World Resources Plc ("NWR Plc" and together with its subsidiaries, the "NWR Group") today provides an update on the status of the insolvency of OKD, a.s. ("OKD") and it clarifies various factually incorrect statements that have appeared in recent Czech insolvency court filings and in media reports regarding the NWR Group's 2014 comprehensive balance sheet restructuring (the "2014 Restructuring").

Introduction

Further to the announcements on 3, 4 and 16 May 2016regarding the filing of and the impacts of the filing of an insolvency petition by OKD, the shares in NWR Plc remain suspended from the London Stock Exchange, Prague Stock Exchange and Warsaw Stock Exchange.

Aspreviously announced on 16 May 2016, as a result of the insolvency petition being filed by OKD, the EUR 35 million super senior credit facility ("SSCF") lenders and requisite majority of holders of the EUR 352 million Senior Secured PIK Notes due 2020 ("SSNs") have issued a demand upon the guarantees given by OKD for payment of the SSCF and SSN liabilities (the "Guarantees"). Consequently, Citibank N.A., acting as the security agent on behalf of the creditors under the SSCF and the SSNs (the "Security Agent"), registered creditors' claims in respect of the Guarantees in the total amount of approx. CZK 10.5 billion. The Security Agent is the largest creditor in OKD's insolvency proceedings.

Update on the OKD Insolvency

Registered creditors' claims

On 18 May 2016, the Regional Court in Ostrava (the "Court") delivered a notification to all known foreign creditors of OKD inviting them to register their claims with the Court by a deadline of 30 days after receipt of the notification.

As of 3 August 2016, according to the filings made with the Court, approx. 550 creditors have registered their receivables against OKD for a total amount of CZK 20,281,010,690.77 out of which more than CZK 17 billion have been contested and denied

New World Resources Plc | c/o Hackwood Secretaries Limited, One Silk Street | London EC2Y 8HQ | United Kingdom | Headquarters: Jachthavenweg 109h | 1081 KM Amsterdam | The Netherlands |

Tel: +31 20 570 2200 I Fax: +31 20 570 2222 I E-mail:info@nwrgroup.eu I www.newworldresources.eu I

A public company incorporated in England and Wales with Company Number 7584218 I New World Resources Plc is also registered with the trade register in the Netherlands under number 55931758. 1/8

EMEA 105890663

by the insolvency trustee. The filings suggest that all creditors are unsecured, except for Zeppelin CZ, s.r.o. that claims to have a secured claim of CZK 68,903,810.99 retention over machinery belonging to OKD.

According to the filings registered with the court, the five largest creditors (by value of the registered claim) of OKD as follows:

Creditor Registered claim (CZK) Comment

The Security Agent 10.5 billion Guarantee claim in respect of SSN

and SSCF, being contested by OKD and insolvency trustee

Ministry of Industry and Trade 1.888 billion Contingent claim, no funds have

been provided at this time to OKD by the Ministry of Industry and Trade, being contested by insolvency trustee

Veolia Průmyslové služby 1.34 billion Apart from CZK 54 million, being

contested by OKD and insolvency trustee

Natixis 518 million ECA Facility under which OKD is co-obligor

Advanced World Transport group creditors

462 million

Temporary injunction and appointment of the members of the interim creditors committee

On 25 May 2016, OKD filed a motion for a temporary injunction against NWR Holdings

B.V. ("NWR BV"), arguing that there is a conflict between OKD's interests and the interests of Ashmore Investment Management Limited, Gramercy Funds Management LLC and M&G Investment Management Limited (together, commonly referred to as the "Ad-Hoc Group" or "AHG") given that the Ad-Hoc Group indirectly controls OKD and is, at the same time, its key creditor.

On 26 May 2016, the Court decided ex parte that: (i) OKD's operations may only be halted and/or restricted with the prior consent of the interim creditors' committee (the "ICC") or, until the ICC is appointed, the prior consent of the Court; and (ii) the effectiveness of any decisions of NWR BV in its capacity of the sole shareholder of OKD is conditional on the consent of the ICC or, until the ICC is appointed, the prior consent of the Court.

On 1 June 2016, the Court appointed Advanced World Transport, a.s., Czech Social Security Administration and the Coalfield Brotherhood Cash Office, a health insurance company, as the three members of the ICC. The Security Agent was excluded from the ICC. The Creditors Meeting will appoint a regular creditors' committee that should replace the ICC appointed by the Court.

On 9 June 2016, NWR BV filed its objection to the temporary injunction.

On 16 June 2016, OKD filed its reply with the Court to NWR BV's objection to the temporary injunction. In the reply, OKD also asserted that the NWR Group "forced" OKD to assume the Guarantees.

On 17 June 2016, the Security Agent filed a reply dated 9 June 2016 to OKD's motion for a temporary injunction against NWR BV. In the filing, the Security Agent noted that (i) NWR Plc (and not the AHG) is the entity controlling OKD and (ii) the Security Agent is the largest creditor and not the AHG, therefore it is incorrect to describe the AHG as both the controlling entity of OKD and the largest creditor.

On 7 July 2016, the Senior Prosecutor´s Office in Olomouc supported NWR BV´s objection in its statement filed with the High Court. It concluded that:

'the contested decision of the Regional Court in Ostrava [is] incomprehensible, unreviewable and based on an incorrect legal assessment of the matter.'

On 15 July 2016, the High Court in Olomouc (the "High Court"), in an un-appealable ruling, upheld the Court's 26 May 2016 decision to issue the temporary injunction. The High Court noted in its judgment that it will not examine who currently controls OKD as it did not find it relevant for the assessment of the temporary injunction. In the High Court's view, the relevant "material reason", was the High Court's belief that, pursuant to the 2014 Restructuring, NWR BV and New World Resources N.V. ("NWR NV") "burdened" OKD with the Guarantees. The High Court noted that Mr Boudewijn Wentink signed on behalf of NWR NV, NWR BV and OKD the 2014 Restructuring documentation which burdened, among others, OKD.

OKD's and the insolvency trustee's rejection of the Security Agent's creditor claims

On 25 July 2016, the insolvency trustee of OKD published a list of registered creditor claims which indicated that OKD and the insolvency trustee did not recognise the Security Agent's claims in respect of the Guarantees given by OKD for payment of the SSCF and SSN liabilities. In the filing, OKD and the insolvency trustee made certain statements, including that:

  1. The debts secured by the Guarantees do not exist;

  2. NWR NV forced OKD to assume obligations as guarantor of the Guarantees;

  3. The Guarantees were not duly and properly agreed and executed by OKD; and

  4. No consideration for the Guarantees was provided.

The above statements, and the reasoning given in the High Court ruling, are factually incorrect, as follows from the overview of the NWR Group's 2014 comprehensive balance sheet restructuring below.

On 8 August 2016, the Security Agent filed a statement with the Court responding to OKD's and the insolvency trustee's rejection of its creditor claims.

2014 Restructuring Facts

Overview and benefits to OKD

As was publicly stated by the NWR Group at the time, the primary objectives of the 2014 Restructuring were to:

  1. mitigate the risk of any of the NWR Group companies (in particular NWR Group's key operating subsidiary, OKD) having to file for bankruptcy or liquidation (or another formal insolvency process); and

  2. implement a new capital structure so that the NWR Group will possess a strengthened balance sheet and a more appropriate debt service and maturity profile in light of the ongoing difficult trading conditions in the global coal mining market.

As a result of the 2014 Restructuring, OKD's obligations as a guarantor under the EUR

500 million old senior secured notes due 2018 were fully and finally released ("Old Guarantee"), and OKD became a guarantor under the Guarantees. Accordingly, OKD's exposure to liability as a guarantor was reduced by 33% from €500 million under the Old Guarantee to €335 million under the Guarantees. In addition, immediately following the 2014 Restructuring, the NWR Group injected vital cash (via shareholder loans) into OKD to ensure it continued as a going concern - EUR 64 million was injected into OKD between 2014 and 2016. Even prior to the 2014 Restructuring, OKD received significant amounts of monies from the NWR Group over the years. Between 2010 and 2016, OKD received the benefit of EUR 650 million of shareholder loans - funded by the issuance by NWR Group entities of bonds that were guaranteed by OKD - of which EUR 586 million was converted into equity of OKD and is never to be repaid by OKD. The evidence of the inflow of these

NWR - New World Resources plc published this content on 08 August 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 08 August 2016 15:32:02 UTC.


© Publicnow 2016
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