UPDATE 2-Top StanChart banker pushed out over Indonesia loan-sources
* Kay resigned in September, Stanchart says
* Sources say he was pushed out over loan
* Was trying to sell down $1 bln loan to Indonesian Samin Tan
* StanChart struggled to drum up interest in loan from other banks
* "Somebody's head had to roll," one source said
By Prakash Chakravarti and Saeed Azhar
HONG KONG/SINGAPORE, Oct 17 (Reuters) - A top Standard Chartered banker involved in making a $1 billion loan to the Indonesian chairman of London-listed Bumi Plc has quit after the bank struggled to get other lenders on board.
Businessman Samin Tan used the funds to buy a stake in the coal miner only to see the investment plunge in value as the board was rattled by rifts between key shareholders, including British financier Nat Rothschild and Indonesia's influential Bakrie group. More recently, Bumi Plc launched an investigation into alleged financial irregularities at its Indonesian units.
The loan is secured, reducing the British bank's risk, but so far it has sold down just $230 million of the loan, leaving $770 million on its books.
Sources said Peter Kay, global head of leveraged finance syndication at Standard Chartered, was pushed out of the bank. Bank spokeswoman Valerie Tay said he resigned at the end of September to pursue other interests.
Calls to Kay's mobile phone were not returned and Tan did not immediately respond to an emailed request for comment.
A senior source at Standard Chartered said Kay would have been involved in but not solely responsible for the decision to extend the loan to Tan. The $1 billion investment is now worth around $230 million based on Bumi Plc share price movements.
"The credit committee and the executive committee had signed off on the loan," said the source. "Unfortunately, the reality was that ... somebody's head had to roll. Kay was very unhappy at being used as the fall guy."
A separate source familiar with the matter said he thought Kay was being used as a scapegoat. It was easy to blame the syndicate team for not selling down the loan, this source said.
While Kay would have been involved in structuring the terms of the loan, with Standard Chartered as a sole underwriter over five years, relationship bankers pushed the deal hard internally, this source added.
Both sources, who declined to be identified because of the sensitivity of the issue, said Kay was pushed out. The bank did not immediately return a separate call for comment on the specific circumstances of Kay's departure.
The loan is a small fraction of Standard Chartered's overall lending book, but it was the single largest underwritten loan by any bank in Asia in 2011.
As head of leveraged finance syndication, Kay and his team were responsible, among other things, for selling on a portion of corporate loans to other institutions to reduce Standard Chartered's financial exposure to the debt.
Among other projects, Kay was tasked with distributing the $1 billion loan that the bank wholly underwrote on behalf of Tan's coking coal mining firm PT Borneo Lumbung Energi , after it bought a 23.8 percent stake in Bumi Plc.
Basis Point, a Thomson Reuters company, reported that general syndication for the loan closed on Tuesday, citing a source close to the deal, with only two other lenders joining.
First Gulf Bank of the United Arab Emirates took on $200 million and Dutch pension fund PGGM Vermogensbeheer BV took $30 million, said Basis Point, which first reported Kay's departure.
Standard Chartered structured the Borneo Lumbung loan with pricing of 607 basis point to 657 basis point over Libor, attractive pricing at the time. However, general risk aversion was high over the euro zone crisis.
Moreover, many market participants associated the loan with Indonesia's Bakrie group, which defaulted during the Asia financial crisis, and so felt it was too risky, ba nkers familiar with the deal said.
The Standard Chartered loan is secured against assets at Borneo Lumbung and its stakes in operating companies PT Asmin Koalindo Tuhup and PT Borneo Mining Services.
"The loan is predicated on the cash flow of his own business and not predicated on his investments," said a source with direct knowledge of the matter.
Borneo Lumbung's net profit dropped 58.7 percent in the first half of 2012 from a year earlier in U.S. dollar terms, partly hit by interest expenses and a sharp drop in coal prices.
"The company might need to refinance the facility or do a rights issue to refinance the rest of facility at 2015 because of low cash reserves, unless we see a rebound in coking coal price in the next two years," said Jemmy Paul, equity fund manager at PT Sucorinvest Asset Management in Jakarta.
Tan used the loan to buy a 23.8 percent stake in Bumi Plc from the Bakrie Group. He was subsequently made chairman of the firm.
Bumi Plc's share price has tumbled this year on a mixture of debt concerns, tensions between shareholders and weakening demand growth globally for coal.
In September, the shares took another hit when Bumi Plc commissioned a London law firm to look into alleged financial irregularities in more than $500 million of funds at its Indonesian subsidiaries.
The Bakrie family, which originally held a controlling interest in Bumi Plc before turning to Tan, has proposed a plan to bring back Bumi's coal assets under its roof.
Rothschild, who owns 12 percent of Bumi Plc, resigned from the company's board this week and accused both the Bakries and Tan of acting against the interest of minority shareholders.
Kay's departure follows a series of changes in Standard Chartered Bank's debt capital markets business since the appointment of former Credit Suisse banker Carsten Stoehr as head of global capital markets in June.
After the 2008 slump, bankers said Standard Chartered was more aggressive in loan pricing and underwriting, which it used to maximum affect to support core clients.
In 2008 and 2009, the bank separately underwrote $6 billion and $5 billion for Bharti Airtel in the Indian telecom firm's failed multi-billion-dollar merger with South Africa's MTN Group.
Historically, Standard Chartered has been willing to absorb so-called "stick" positions - unsold underwritten exposures on syndicated loans - above industry norms. Sometimes, the bank has held on to the exposure until it is refinanced and, on other occasions, it has sold some debt in the secondary markets.
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