November 10, 2014 / 4:27 AM / 5 years ago

Bonds of Indonesian coal miner Berau Coal fall on refinancing worries

HONG KONG/JAKARTA, Nov 10 (Reuters) - Bond prices of Indonesian coal miner PT Berau Coal Energy Tbk fell on Monday on concerns that a key shareholder of its parent company may have to sell some assets to pay off debt.

Berau’s bonds maturing in 2017 were trading at 54/56 cents on the dollar, down from last week’s level of 70.

A Berau spokesman did not respond immediately when contacted about Monday’s bond-price fall.

London-listed Asia Resource Minerals Plc (ARMS) controlled nearly 85 percent of Berau as of June, according to Thomson Reuters data.

Indonesian tycoon Samin Tan owns 47.6 percent of ARMS, but Austrian bank Raiffeisen Bank International AG, which is owed $224 million by Tan, in late October took over his voting rights on half of that stake.

Tan is in talks to sell assets including all or part of his stake in ARMS to help repay Standard Chartered Plc and Raiffeisen close to $1 billion, Reuters reported on Friday.

“When a bank takes over the stake of a key shareholder it’s not a positive sign. Banks generally do what is best for themselves rather than other stakeholders,” a trader said.

Standard & Poor’s Ratings Services and Moody’s Investors Service both lowered Berau’s credit ratings last week.

A further decline in coal prices since the beginning of October and the prospect of large negative free operating cash flows over at least the next two years “will compound an already cautious market sentiment”, S&P said.

“If Berau Energy does not refinance its debt over the next few weeks, we believe the likelihood of a distressed exchange or a debt restructuring will increase,” it said. (Reporting by Umesh Desai in HONG KONG and Fransiska Nangoy in JAKARTA; Editing by Richard Borsuk)

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