Vol 12 (2015) - Issue 2

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Restructuring in the Face of Uncertainty: NWR's 'Toggle Scheme'

Introduction
New World Resources N.V. ('NWR') needed to restructure urgently in the face of uncertain support from junior creditors, and where a fully consensual restructuring was contingent on its majority shareholder providing significant new cash. Whilst every restructuring is unique, the 'Toggle Scheme' solution developed on NWR's restructuring has important implications for future restructurings involving multiple creditor classes and/or potentially requiring equity investor support.

Pre-restructuring capital structure
NWR is the principal finance and investment vehicle for one of Europe's largest coal mining groups, with its principal mining operations in the Czech Republic. NWR's parent ('NWR Plc') was (and remains) a UK public limited company, listed on the London, Prague, and Warsaw stock exchanges. The group's sponsor ('CERCL') was NWR Plc's largest shareholder, and also separately owned and controlled infrastructure assets that were critical to the group's ongoing operations.
Prior to its restructuring, NWR's largest creditor groups were the holders of two series of New York law governed notes – one series of EUR 500m 7.875% senior secured notes due 2018 (the 'Senior Notes'), which benefitted from security over, and guarantees from, NWR's key operating subsidiaries; and one series of EUR 275m 7.875% senior notes due 2021 (the 'Junior Notes', and together with the Senior Notes, the 'Notes'), which were unsecured but ranked pari passu with respect to cash and physical assets on NWR's balance sheet. NWR also had a bank facility with EUR 50m outstanding (the 'ECA Facility'), supported by an export-credit agency guarantee. Whilst unsecured, NWR's key Czech operating subsidiary was a co-obligor under the ECA Facility.