1st Jun 2015 12:53
LONDON (Alliance News) - Asia Resource Minerals PLC Monday said it thinks the takeover offer proposed by Asia Coal Energy Ventures Ltd and the associated recapitalisation is the best option for it to pursue, although it is still leaving the door open for a potential rival recapitalisation plan from Nat Rothschild's NR Holdings.
Asia Resource Minerals urgently needs to sort out its finances as its PT Berau Coal Energy subsidiary has to repay a USD450 million bond by July 8. However, it is also struggling to re-establish effective control over its Berau coal mining business in Indonesia and last week launched court proceedings in London against Amir Sambodo, its former chief executive who the company accuses of "unlawful intermeddling".
"Such intermeddling is now unfortunately causing delays in the payment of certain mining contractors, notwithstanding the fact that more than sufficient funds are available to Berau to make such payments. This could conceivably result in both the suspension of mining operations by one or more of such contractors, and cause one or more of the contractors to take insolvency actions against Berau in the Indonesian courts, which may have results which are materially detrimental to the company's value," Asia Resource Minerals said Monday.
The company said it has now evaluated the financing options available to it and currently believes that the takeover offer tabled by Asia Coal Energy Ventures Ltd and the associated recapitalisation "at this stage represents a viable way forward for the company".
It noted, however, that there are material conditions attached to the offer and therefore "prefers, to the extent it is possible, to retain for the present the availability of the previously announced open offer underwritten by NR Holdings Limited and the associated notes exchange".
"However, the company does not presently consider that there is material utility in seeking to progress the NRH Recapitalisation as if the conditions to the ACE Offer and ACE Recapitalisation are satisfied, and they proceed to a successful conclusion, they appear a better option for the company at this stage," it added.
Asia Coal Energy, a group backed by the Indonesian Widjaja family's Sinarmas Group, has proposed a 41 pence a share takeover offer for Asia Resource Minerals. Asia Coal Energy, which is managed by hedge fund Argyle Street Management Ltd, said it would also underwrite a pre-emptive capital raising by Asia Resource Minerals of USD150 million at a price of at least 28.0 pence a share. It would use the money raise to reduce Asia Resource's debt, to exchange bonds due in 2015 and 2017, and to fund operations.
That came after financier and Asia Resource Minerals shareholder Nat Rothschild offered to underwrite a USD100 million equity injection into the company through an open offer of shares. Rothschild then teamed with SUEK, the holding company for Russian coal producer OJSC Siberian Coal Energy Company, to mull a counter offer to Asia Coal Energy's bid, but decided to withdraw from the bidding battle while Rothschild kept his recapitalisation plan on the table.
London-listed Asia Resource Minerals indirectly owns 84.7% of PT Berau, which indirectly owns 90% of Berau Coal, a thermal coal producer in Indonesia. The coal miner has a critical need for finance as pressure on thermal coal prices has hurt its ability to repay USD450 million of notes due in July and a further USD500 million in March 2017.
Asia Resource Minerals said Monday it would now work with Asia Coal Energy to reduce the conditionality of its takeover offer and the associated recapitalisation, while Asia Coal Energy has agreed to help Asia Resource Minerals re-establish practical control of Berau.
A key element at play in the battle for the company is that 23.81% of the voting rights in Asia Resource Minerals were transferred to Austria-based Raiffeisen Bank from Samin Tan in October 2014. Tan, an Indonesian investor who used to be the chairman of Asia Resource Minerals, is still able to control indirectly a further 23.8% stake.
Asia Coal Energy said it has received an irrevocable undertaking to accept the offer from Ravenwood, the vehicle holding the 23.81% stake that's now controlled by Raiffeisen Bank. The vehicle said its deal with Raiffeisen means it is set to buy loans owed to the Austrian bank by Tan companies for USD120 million minus the money that will be raised by selling the 23.81% stake.
Asia Resource Minerals said Monday that the purchase price for the Raiffeisen loans is about USD895 million. The company's financial adviser needs to provide an opinion on whether the terms of the loans acquisition is fair and reasonable, and Asia Resource Minerals said work to obtain this opinion is now underway.
"At this stage, no conclusion has been reached as to fairness. If, however, the allocation of value is opined to be fair and reasonable the company will then in turn put this issue to independent shareholders for a vote," it said, adding that it also expects to provide shareholders with a formal view on the Asia Coal Energy takeover offer at the same time.
Independent shareholders of Asia Resource Minerals must approve the loans agreement between Raiffeisen and Asia Coal Energy. The terms of the acquisition of the loans must also be deemed "fair and reasonable" by Asia Resource Minerals' independent financial adviser for Ravenwood's irrevocable undertaking to be anything more than conditional. Investment bank NM Rothschild & Sons, which is independent of Nat Rothschild, is Asia Resource Minerals' financial adviser.
Asia Resource Minerals also noted that Asia Coal Energy has reached an agreement in principle with an ad hoc committee of noteholders holding a "significant percentage" of the notes due in 2015 and 2017.
"ACE has indicated that the terms of the restructuring are similar, in all material respects, to terms under the NRH recapitalisation subject to the provision of an additional USD50 million for working capital purposes. In the absence of any superior proposal arising, the company presently intends to cooperate with the Steering Committee and ACE to progress the bond restructuring and alternative ACE recapitalisation expeditiously, and in parallel with the ACE cash offer," the company said.
Asia Resource Minerals shares are currently suspended.
By Steve McGrath; [email protected]; @SteveMcGrath1
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