Final Word from Thursday, July 4, 2013



A classic case of tunneling is when the owner or managers of a company strip out assets and leave the empty shell and a mountain of debt to the creditors and employees. MUS's former managers are being prosecuted for a version of this in Switzerland. If there were any justice in the world, some top managers and overseers of ČEZ, Czech Railways, ČSA, Lesy ČR and other state-owned companies would also be put before a tribunal or funeral pyre. In its rawest form, tunneling is straight-out theft, but Zdeněk Bakala and his partners at OKD did their tunneling the legal way. Before the IPO in 2008, they loaded the company up with debt and paid themselves dividends of €1,487,639,000. That's Kč 38.7bn at today's exchange rate. Thanks to this form of legalized Wall Street tunneling, NWR now has debt that is more than twice its market value ... and the company is just a few steps away from bankruptcy.[Czech Republic RPG RPGA New World Resources initial public offering mining dividend recap recapitalization]

Glossary of difficult words

tunneling - the Czech word for asset-stripping;

to strip (a company) - to sell off the assets of a company for profit;

overseer - a person who supervises others;

funeral pyre - a pile of wood on which a corpse is burned as part of a funeral ceremony in some traditions;

straight-out - unadulterated; absolute;

IPO - initial public offering (see Page F-37 of the IPO Prospectus for dividend payments);

to load something up (with something) - to encumber or burden something.

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