ECA funding proves key for Indonesian mobiles

In December 2008, Standard Chartered and RBS closed a US$214mn export credit agency (ECA)-backed transaction for Indonesia telecoms firm PT Excelcomindo Pratama.

The deal involved the Swedish ECA, EKN, and it is one of the largest ECA-supported telecoms deals to be signed in Indonesia.

The financing was raised to support the purchase of telecoms equipment and services from Ericsson in Sweden, and this tranche is the first in a planned facility of US$428mn.

It is of additional significance that this deal was one of the first ECA-backed deals for the Indonesian telecoms market in recent years, and therefore has successfully reopened the market for similar deals in the future.

Despite worsening global market conditions, the transaction was expertly executed within just three months from the date the mandate was awarded.

“The XL transaction benefited from smooth co-ordination between our Asian and European team resulting in one of the fastest closings for a new corporate EKN transaction and allowed the borrower to tap into an important new source of liquidity at the right time,” says Evert Jan Zondag, director, cross-border structured trade and commodity finance at RBS.

The buyer is PT Excelcomindo (XL), one of the largest telecoms operators in Indonesia. XL is majority-owned (83.8%) by TM International through Indocel Holding, and the remaining stakes are held by Emirates Telecommunications Corporation (Etisalat) International Indonesia, a wholly-owned subsidiary of Etisalat (16%), and the public (0.2%).

XL commenced operations in October 1996.

As of September 30, 2008, it had 25.1 million subscribers, of which approximately 98% were prepaid.

XL has a long-standing relationship with Swedish firm Ericsson.

However, previous financing packages were managed without the support of EKN as the corporate finance market was liquid enough to provide funds.

Yet this situation changed in late 2008, and ECA funding was viewed as a potentially attractive alternative.

Commenting on the success of the deal, Charles Carlson, global head, structured export finance, Standard Chartered Bank, says: “In the challenging climate last year, the Excelcomindo deal has made an impression because it is one of the largest ECA telecom financings in Indonesia to date and the transaction was successfully closed in three months from the date the mandate was awarded.

“This transaction has allowed the company to leverage an additional source of funding where liquidity has been tight, hence enabling timely payment to their supplier.”

In light of challenging cross-border swap market conditions, this transaction is also structured with a flexible hedging strategy, which is of additional benefit to the borrower.

Elaborating on the risks involved in this deal, Helén Seemann, director, large corporates, at EKN, remarks: “The main risk in the transaction was considered to be the high investment pace and the possibility for Excelcomindo to finance this expansion. The risk was however mitigated by the strong market position, a substantial customer base and a strong owner.”

Deal Information

Borrower: PT Excelcomindo Pratama
Amount: US$214mn
Mandated lead arrangers: Standard Chartered; RBS
Law firms: Clifford Chance Wong (Singapore); Advokatfirman Vinge; Hisw ara Bunjamen & Tandjung
Tenor: 7 years
Date signed: December 2008