Bell Pottinger's Asian arm rebrands as London parent faces administration

LONDON (Reuters) - The Asian arm of PR agency Bell Pottinger has rebranded itself as Klareco Communications and plans to separate from the scandal-hit British parent which it expects will go into administration next week.

Until recently one of the world's biggest PR firms, Bell Pottinger has put itself up for sale after losing clients for running a racially charged campaign in South Africa which has led to it being shunned by its peers.

As a result the firm's second-biggest shareholder, Chime, has written off its 25 percent stake and its chief executive and biggest investor have quit.

Co-founder Tim Bell, who resigned last year, said on Wednesday the agency was now "close to the end".

"I think it's very sad that something that I ran for years and years has been destroyed in less than a year," he told Reuters.

Earlier this week the firm said it had appointed accounting firm BDO to advise it on a possible sale but no buyers have emerged and administration is now in prospect, a source familiar with the matter said.

Bell Pottinger in London said on Friday only that the firm was "looking at all options".

The heads of Bell Pottinger's Asian business, run as a legally separate entity, said that they now plan to relaunch as an independent firm called Klareco Communications with a new ownership structure.

"While the UK business is expected to go into administration as early as next week, the Asia business is entirely ring-fenced and solvent," the Asian arm said in a memo to clients on Friday.

Klareco means clarity in Esperanto.

Lloyds Banking Group, Britain's biggest mortgage lender, will be among its biggest creditors if the group fails to find a buyer.

Lloyds may appoint an administrator if the company fails to make payments on the debt according to Bell Pottinger's regulatory filings from March, which didn't disclose the size of the loan.

Lloyds declined to comment.

On Tuesday Britain's Public Relations and Communications Association (PRCA) expelled Bell Pottinger for a minimum of five years, an unprecedented step for such a prominent member, for running the South African campaign in support of South African President Jacob Zuma.

It had been working with the president's son and the influential Gupta family on a political campaign that South Africa's main opposition party, the Democratic Alliance described as a bid to "divide and conquer" the public.

According to an email published in South African media, Bell Pottinger said the campaign needed to stress the continued "existence of economic apartheid".

The PRCA said the campaign had deliberately inflamed racial tensions.

Bell Pottinger has apologised for the campaign and described it as "inappropriate and insensitive", but it disputed the basis on which the PRCA ruling was made.

(Reporting by Rachel Armstrong and Andrew MacAskill; Editing by Greg Mahlich)