November 7, 2014 / 3:48 PM / in 3 years

Exclusive: Tan in talks to sell ARMS stake to repay Standard Chartered

Samin Tan, chairman of Bumi Plc arrives before a shareholder meeting in London February 21, 2013. REUTERS/Stefan Wermuth

JAKARTA (Reuters) - Indonesian businessman Samin Tan is in talks to sell assets including all or part of his stake in Asia Resource Minerals (ARMS) to help repay Standard Chartered and Raiffeisen close to $1 billion.

Boardroom battles, allegations of wrongdoing and falling coal prices have soured Tan’s investment in the Indonesia-focused miner, previously known as Bumi Plc, whose shares of which are down 90 percent since its creation in 2010.

The stake has also created a headache for Standard Chartered, which is owed around $750 million by Tan -- $600 million of that a syndicated loan.

The London-headquartered bank is under pressure from investors after impairments doubled in the third quarter as falling commodity prices hurt corporate borrowers, pushing it to its third profit warning this year.

“I believe our relationship with Standard Chartered is still good and we are still committed to paying off our debt to them in full, even though the market conditions are difficult and coal prices are depressed,” Alexander Ramlie, chief executive of Tan’s company, PT Borneo Lumbung Energi & Metal Tbk, told Reuters.

“We will sell some assets in Borneo and we are having discussions with Standard Chartered regarding our planned production and cash flow for the next five years. We are trying to cut costs and we may also sell some mining equipment.”

Ramlie said the plan to resolve the company’s debts with Standard Chartered and Austrian bank Raiffeisen, which is owed $224 million, would likely include the sale of shares in ARMS.

”We are in talks with several potential investors to sell all or part of our shareholding in ARMS in order to resolve our debt issue with Standard Chartered and Raiffeisen,” he said.

Tan, who was chairman of London-listed ARMS until the end of last year, has a 47.6 percent stake in the company, which is worth approximately $62 million at current market prices.

Raiffeisen took over Tan’s voting rights on a 23.8 percent stake in ARMS last week, meaning that he is no longer a controlling shareholder.

The Austrian bank declined to comment on the status of Tan’s debt, a loan granted to him in November 2013 to help him double his stake in ARMS. A spokesman said the bank intended to get repaid in full.

No one from ARMS was immediately available to comment.

A spokesman for Standard Chartered also declined to comment.

Standard Chartered originally lent $1 billion to PT Borneo Lumbung Energi and Metal, a coal mining company controlled by Tan, to buy a 23.8 percent stake in what was then Bumi in late 2011. It was the single largest underwritten loan by any bank in Asia that year.

The loan was secured against assets at PT Borneo Lumbung Energi and Metal and its stakes in various operating companies.

Standard Chartered restructured the loan to $600 million but according to Ramlie, PT Borneo Lumbung Energi and Metal still owes it $750 million.

    The bank’s chief executive Peter Sands has said he will step up a restructuring plan to cut more costs, aiming to turn around the bank’s performance after its 10 years of record earnings came to a shuddering halt last year.

Hit by rising bad loans in China and India, Standard Chartered’s gross non-performing loans in its corporate and institutional book rose to $5 billion at the end of June from $3.9 billion a year ago.

The bank is due to hold a 3-day roadshow for investors in Hong Kong next week.

Additional reporting by Steve Slater and Silvia Antonioli in London, Prakesh Chakravarti in Hong Kong and Mike Shields in Vienna. Writing by Carmel Crimmins; Editing by Clara Ferreira Marques

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