Hard coal mining company OKD files for insolvency

The OKD hard coal company, belonging to New World Resources which is in controlled by the by the so-called Ad Hoc Group, filed for insolvency on Tuesday; the move had been expected after the government made clear last week it would not step in to help the long-ailing firm. The company issued a statement that it had filed with an aim to “restructure the company and maintain viable operations”.

Photo: archive of OKD

The company said it did not have the money to cover liabilities at the moment but said it would be able to keep the company running and to pay wages to employees.

The company spokesman Ivo Čelechovský made clear that the management would try and restart talks with the government on the company’s restructuring. Last week, the government refused to budge after the company made what was viewed as a highly disadvantageous offer to sell company shares for 3.2 billion crowns. That was rejected outright by Minister of Industry and Trade Jan Mládek.

At the same time, the government expressed a commitment to help miners who could soon be out of work. Despite serious difficulties, Mr Čelechovský maintained on Tuesday that OKD would continue to meet long-term contractual commitments, that it would receive payments in May and that it would maintain coal shipments.

OKD found itself in major difficulties following a significant drop in coal prices. Despite cost-saving measures, the firm began operating at a loss; another problem is that the firm is saddled with high debt. In February, ownership of OKD, through New World Resources, was consolidated by shareholders of the so-called Ad Hoc Group. If they bet on a bailout by the government however, the strategy did not appear to be bringing results.

Lost on no one, especially, politicians, is the potential impact if the company were to fold completely: the OKD mining company represents almost 10,000 core jobs, 2,500 jobs for suppliers, and 200 more from agencies.

Last week, in an interview for Radio Prague, the spokesman for the Ad Hoc Group Roman Pařík called the potential demise of OKD a “social and economic time bomb” for the region of Moravia-Silesia. There is no question the government may still try and save jobs if it can, but on far different terms than those advanced by the owners until recently. Miners’ union leader Jaromír Pytlík, meanwhile, said he welcomed that the company had filed for insolvency, suggesting that OKD could perhaps still be saved if the lines to NWR and the Ad Hoc Group were severed.