Deal News:

PT Adaro Indonesia notes issuance and loan facility

Synopsis
 
US$1.3bn financing comprising US$800m offering of guaranteed senior notes issued by PT Adaro Indonesia and $US500m bank facility provided to PT Adaro Indonesia.

Firm
Client
 
Role
Milbank Tweed Hadley & McCloy
 
 
Borrower and issuer
 
PT Adaro Indonesia
 
International counsel
 
 
Stamford Law Corporation
Borrower
 
PT Adaro Indonesia
 
Singapore counsel
Hendra Soenardi & Rekan
Borrower and issuer
 
PT Adaro Indonesia
 
Indonesian counsel
Latham & Watkins
 
 
Underwriters
 
Credit Suisse, DBS Bank and UBS
 
International counsel
 
Underwriters
 
Credit Suisse, DBS Bank and UBS
 
Indonesian counsel
Latham & Watkins
Consortium of lenders
 
Oversea-Chinese Banking Corporation, DBS Bank, Sumitomo Mitsui Banking Corporation, BNP Paribas, The Bank of Tokyo-Mitsubishi UFJ (Singapore Branch), United Overseas Bank Limited, Chinatrust Commercial Bank Co (Singapore Branch), PT ANZ Panin Bank, PT Bank Mandiri (Persero) Tbk (Singapore Branch), Standard Chartered Bank and The Hongkong and Shanghai Banking Corporation Limited
 
International counsel
Allen & Gledhill
Consortium of lenders
Singapore counsel
 
Consortium of lenders
Indonesian counsel

The natural resources sector in Indonesia is heating up. Leading coal mining company, PT Adaro Indonesia, has attracted significant interest from international financiers resulting in oversubscription in both an offer of senior guaranteed notes and a bank facility.

“There was a huge demand for both the bank and bond deal, which is great to see because there has been an issue with liquidity in the past. Liquidity has increased again and we are seeing great demand for Indonesian borrowers,” said Clarinda Tjia-Dharmadi, partner at Latham & Watkins.

The two financing tranches were different but integrated and Latham & Watkins led the charge on all aspects of the deal for all the lenders and the underwriters, with assistance from Indonesian and Singaporean counsel. “The bank facility was done as a club deal. We negotiated with all 11 banks at the table with the borrower. Each had different internal requirements but we have done a lot of work with all these banks so we are very familiar with them and it was easy to juggle,” said Tjia-Dharmadi.

Latham & Watkins is familiar with the borrower having advised its lenders on previous financing deals. However, the recent legal change which requires all agreements involving private Indonesian institutions to be drafted in Indonesian posed a challenge due to its uncertain application.

“This deal is one of the most significant deals to close since the promulgation of the new laws. So we were dealing with matters of first impression and this deal set the precedent in terms of the approach to be taken,” said Tjia-Dharmadi. It was decided that the transaction documents would be translated into Indonesian by Indonesian counsel and priority given to the English language documents in the event of any inconsistency between the two versions. Indonesian counsel signed off with clean opinions on their enforceability in Indonesia.

PT Adaro Indonesia will use the proceeds of the loan to repay some debt and for general corporate purposes. The funds raised through the issue of notes will be used to expand production. “Physically digging the coal and transporting it to port requires a lot of infrastructure… They are contemplating a lot of capital expenditure to increase production and there is also the possibility that they might make some other acquisitions,” said John Otoshi, partner at the Hong Kong office of Latham & Watkins.

The interest generated by the coal company and its activities is a reflection of confidence in this sector in Indonesia. “There is a huge need for investment in natural resources and infrastructure and the interesting thing is that Indonesia is one of the few countries that has resisted the global economic downturn. So we continue to see activity in Indonesia and we expect it only to increase,” said Tjia-Dharmadi.

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