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Announcement:

Moody's affirms NWR's B1 rating, places debt instruments ratings under review direction uncertain

Global Credit Research - 06 Oct 2010

Approximately EUR 768 million of rated debt affected

Milan, October 06, 2010 -- Moody's Investors Service today affirmed New World Resources N.V.'s ("NWR") Corporate Family Rating (CFR) and Probability of Default Rating (PDR) of B1 and placed under review with direction uncertain the senior secured rating of Ba3 on the EUR 500 million notes due 2018 and the senior unsecured rating of B3 on the EUR 268 million notes due 2015. The rating action follows NWR public tender offer to acquire 100% of Lubelski Wegiel Bogdanka S.A. (Bogdanka) for a total cash consideration of EUR 857 million. The outlook on NWR's CFR remains stable.

The affirmation of NWR's CFR reflects the upside potential in terms of business diversification offered by the combined group if the acquisition is successfully completed thanks to Bogdanka's focus on the more stable thermal coal activity, its relatively large reserves (in the region of 250 million tonnes) and its stable customer base. In addition, Moody's recognises Bogdanka's experience in developing new field projects which should help NWR in developing its Debiensko mine. At the same time, however, the rating agency notes that (i) the additional amount of debt NWR will assume is substantial (the company is planning to use approximately between EUR 300-400 million of cash and approximately between EUR 457-557 million of debt for the acquisition); and (ii) the fact that recent operating performances at NWR have been helped by partial recovery in the coal market (and steel industry) which is likely to remain volatile over the short to medium term.

The affirmation of the rating reflects that the offer price will be limited to the announced EUR 857 million. It also takes into account Moody's assumptions that the company will seek overtime to refinance part of the bridge loan signed to acquire Bogdanka with equity in order to maintain its long term target of a net debt to EBITDA ratios at 2x (on a company's reported basis). Furthermore, in case of successful completion of the acquisition and the possible rights issue, Moody's would expect the impact on key credit metrics to be limited although we will continue to monitor trends in both the coal and steel markets and the potential impact on future operating performances of the group. Moody's acknowledges that NWR has been successful in recent months in rebuilding part of its financial flexibility that was lost during the recent economic crises. During the first six months of the current FY ending December 2010, NWR generated EUR 169 million of EBITDA and reported EUR 433 million of cash on balance sheet at June end.

The stable outlook on CFR incorporates Moody's expectation that the company's profitability is likely to improve from the depressed level experienced in 2009. The current ratings and outlook assume a successful acquisition of Bogdanka in the terms presented to the market on 5 October 2010.

The ratings could be upgraded if the company (i) demonstrates its ability to integrate Bogdanka; (ii) shows improvements in operating margin following the modernisation programme (which is largely completed); and (iii) demonstrates a sustainable robust financial profile.

On the other hand, a deterioration in the company's financial performance as a result of worsening market conditions or deterioration in the liquidity profile might result in a rating downgrade.

The review process on the debt instruments issued by NWR reflects the uncertainties surrounding the future capital structure of the group and specifically the fact that the company might refinance part of the bridge loan through long term debt instruments which seniority and relative ranking against the existing bonds is not known at this stage. Moody's would expect any rating change on the debt instruments to be limited by one notch either way.

The last rating action on NWR was on the 19 April 2010 when Moody's assigned a new provisional rating of (P)Ba3 to the EUR 475 million notes issuance (subsequently increased to EUR 500 million) and changed the outlook on the rating to stable from negative.

The principal methodology used in rating NWR was the Moody's Global Mining Industry rating methodology, published May 2009, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating NWR can also be found in the Rating Methodologies sub-directory on Moody's website.

Headquartered in the Netherlands, New World Resources N.V. (NWR) is the largest hard coal mining group in the Czech Republic and operates through its main subsidiary OKD, a.s. The company reported revenues of EUR 1.17 billion and EBITDA of EUR 179 million during FYE December 2009, which was a decrease of 38% and 74%, respectively, compared to FYE December 2008. During the first six months of 2010, NWR reported revenues of EUR 716 million, up by 48% compared to the same period in 2009, and EBITDA of EUR 169 million, up 122%. The company exploits the Upper Silesian basin in the north-eastern part of the Czech Republic and is expanding its activity in Poland.

Bogdana, incorporated in Poland, is one of Polish largest hard coal mining companies and one of the market leader producers of thermal coal. The company has a production capacity of 5.5 million tonnes and during FYE December 2009 reported revenues of approximately EUR 280 million and EBITDA of approximately EUR 92 million.

Milan
Paolo Leschiutta
Vice President - Senior Analyst
Corporate Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

London
Paloma San Valentin
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
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Moody's affirms NWR's B1 rating, places debt instruments ratings under review direction uncertain
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