PRAGUE (Reuters) - The Czech government approved a 700 million crown ($29 million) loan to help keep afloat hard coal miner OKD, an insolvent unit of New World Resources (L:NWRR) (PR:NWRR), the prime minister and industry minister said on Wednesday.
OKD, a major employer in the Czech Republic's industrial northeast, was declared insolvent by a court in May after its owners failed to secure government aid to help it through a sharp fall in global coal prices.
The company has been scrambling for cash to pay miners' wages in recent months as it goes through insolvency proceedings with the aim of reorganising and government ministers debate how to help the firm.
On Wednesday, the cabinet agreed to extend the loan through state firm Prisko, giving OKD, which employs around 12,500 and mined 8 million tonnes in 2015, enough cash until the end of the year.
"Keeping OKD in operation is an important condition for social stability in the region," Prime Minister Bohuslav Sobotka said on Twitter.
OKD has debt of around 17 billion crowns and assets worth less than 7 billion crowns, according to court filings.
A creditor committee is due to meet in August to decide on the company's possible reorganisation.
The loan "is a very positive impulse for all creditors, on why to lean towards a reorganization, which OKD management proposes and prefers to a possible bankruptcy," OKD managing director Antonin Klimsa said in a statement.
Ashmore Investment Management Limited, Gramercy Funds Management LLC and M&G Investment Management Limited were major bondholders in NWR and became the company's main shareholders when majority owners, including Czech investor Zdenek Bakala, agreed in February to give their shares to the company for free.
OKD's London and Prague-listed shares were suspended after the May insolvency filing.
($1 = 24.4630 Czech crowns)