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S’pore court rules against Deutsche on asset sale

Posted on: April 28, 2009


Reuters – 2 hours 51 minutes ago

By Kevin Lim

SINGAPORE, April 28 – Singapore’s highest court has ruled that Deutsche Bank <DBKGn.DE> may have to pay unspecified damages to an investment firm as it did not get the best price for Indonesian assets that were sold in 2001 to settle a debt.

The case, which has its origins in the 1997/98 Asian financial crisis, involves a 40 percent stake in PT Adaro Energy <ADRO.JK>, Indonesia’s second-largest coal miner, and pits Germany’s largest lender against Beckkett, a Singapore investment firm linked to Sukanto Tanoto, one of Indonesia’s richest men.

The dispute involved claims and counterclaims in the tens of millions of dollars.

In a judgement on Monday, Singapore’s Court of Appeal said Deutsche Bank did not take proper steps to sell a 74.2 percent stake in a firm called Swabara Mining at the best price. The shares had been pledged as security for a $100 million loan, court documents show.

The shares in Swabara, whose assets included the Adaro stake, belonged to Beckkett. The Swabara shares were sold by Deutsche for about $46 million to an investment firm linked to the Soeryadjayas, a wealthy Indonesian family.

The Singapore court ordered that Deutsche pay damages based on the valuation of the pledged shares, although it did not specify the amount. The compensation due to Beckkett will be assessed at a hearing before a registrar at a future date.

The court, however, also upheld Deutsche’s claim that it suffered a loss of $86.9 million, which was the balance of the loan after the sale of the pledged shares plus interest and costs.

UBS analyst Andreas Bokkenheuser said in a note to clients on Tuesday the Singapore judgement created “an overhang” risk in that Beckkett’s claim could be extended to Adaro.

The ruling may also delay an upcoming sale of a 17 percent stake in Adaro by a group of minority shareholders, UBS said.

For a story on the stake sale, click [ID:nSIN409584].

Adaro’s shares fell almost 2 percent on Tuesday after news of the judgement, versus a 1.3 percent gain in the Jakarta bourse <.JKSE>.

In a statement on Tuesday, Beckkett said the damages owed by Deutsche could be “in excess of $150 million” even after settling Deutsche’s counterclaim in full.

Beckkett said it arrived at the figure after referencing Deutsche’s own valuation of the assets held by Swabara.

Deutsche spokesman Michael West, however, described Beckkett’s calculation as “entirely speculative”.

“Beckkett has to still prove that it suffered a loss,” Deutsche said in a statement. “Deutsche will present evidence for the first time to the court in support of its valuation of the shares” at the upcoming registrar’s hearing, the bank said.

 (Additional reporting by Saeed Azhar; Editing by Neil Chatterjee & Ian Geoghegan)

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