Final Word from Wednesday, June 17, 2020



Zdeněk Bakala was one of a handful of people who brought high finance to the CR. In 1993 he said that the Czech government should issue long-term bonds, partly as a way to create a yield curve for serving as a benchmark for companies selling their own debt. In 2006-2007 he famously brought dividend recapitalization to OKD and made a mint for the shareholders even before the IPO. Alas, OKD is now in bad financial straits and needs more than Kč 1bn from the state. Pity Bakala isn't still around. The financial world has made great strides in recent years, and not even insolvent companies need to face funding discrimination. Hertz car rental is in bankruptcy but won court approval to issue up to $1bn in new shares. Hertz admits that there is a significant risk that the stock will become worthless. What Bakala taught Czechs is the importance of not being the one holding the bag. Unless OKD gets creative quickly, it will be all taxpayers, not just a few gullible shareholders. [ Czech Republic NWR New World Resources coal mines ]

Glossary of difficult words

yield curve - a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates;

benchmark - a standard or point of reference against which things may be compared;

dividend recapitalization - a transaction in which a company borrows in order to pay a large dividend;

a mint - a large sum of money;

IPO - initial public offering (of shares);

(bad or dire) straits - difficulty or trouble;

to be left holding the bag - to be left responsible for something;

gullible - easily persuaded to believe something.

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