Merril Lynch ready to finance Berau coal mine takeover

U.S. investment bank Merril Lynch is ready to raise between US$200 million and $300 million in funds for Indonesian businessman Rizal Risjad to take over PT Armadian Tritunggal which has a 90 percent stake in East Kalimantan?s coal miner PT Berau Coal, Bisnis Indonesia reported on Wednesday.

The funds will be used by Rizal to repay debts owed by Armadian to U.S. investment firm Farrallon Capital ? thus blocking Farallon?s efforts to control the coal miner.

?We are studying the details of the matter and will announce it once a deal is clinched,? the paper quoted as source at Merril Lynch as saying.

Armadian has borrowed $60 million with an interest rate of 15 percent from Farrallon to acquire 60 percent of Berau Coal?s shares from United Tractors. The acquisition resulted in the increase in Armadian?s ownership in Berau to 90 percent. The remaining 10 percent shares are owned by Japanese firm Sojitz.

Following Armadian?s failure to repay the debt which has now reached $125 million, including interest, Farrallon is proposing to take over Armadian?s shares in Bearu worth equal to the amount of the debt.

Rizal, a shareholder in Armadian , rejected the proposal.

Aside from Rizal, who is the son of tycoon Ibrahim Risjad, other owners of Berau are John Lensa, the owner of PT Bumi Makmur, the contractor of Berau; Henry Ngadimin, who is linked to the family that owns tobacco firm PT Gudang Garam; and David Yahya, a business partner of Rizal?s father.

Analysts speculate that using Merril?s funds, Rizal will buy out David and Henry?s shares in Berau. This will earn him a control of 70 percent stake in Armadian as well as in Berau Coal. (*)