SYNDICATED FINANCING AS A FUNDING ALTERNATIVE FOR LARGE-SCALE PROJECTS
Indonesia is making significant strides in its development endeavors. Infrastructure projects are underway across the nation, including roads, highways, bridges, reservoirs, power plants, ports, and airports. Additionally, factories are being established to process raw materials into finished goods, supporting industrial down streaming initiatives. This development spans the entirety of Indonesia, from West to East and from North to South. With Prabowo-Gibran leading this country, the development blueprint underlined by Jokowi will be continued.
The goal of improving the welfare of the Indonesian people drives these development efforts, which are not solely reliant on state or local budgets. Commercial projects, such as toll roads, power plants, cargo ports, airports, and factories producing finished goods, are financed through commercial loans from banks and other financial institutions acting as creditors. Some projects receive bilateral financing from a single creditor, while others involve multiple creditors.
Jointly financed projects typically involve large-scale endeavors requiring substantial funding and extended financing periods. Given the scale and associated risks, financing from a single creditor alone is often impractical, necessitating collaboration among multiple creditors. Most large-scale projects in Indonesia are funded through syndicated financing. Syndicated financing provides a mechanism with significant financial benefits for both creditors and debtors.
The benefits and financial advantages of syndicated financing stem from a lengthy mechanism where legal consulting services are required at each stage of the syndication. This includes reviewing the documents of potential debtors, reviewing information memoranda, providing legal opinions, drafting agreements and related documents, and providing assistance in syndication meetings. These legal consulting services are needed to help structure syndicated financing from a legal perspective tailored to the purpose of the financing, the complexity of the financing, and the legal status of the potential debtor and related its parties.
This newsletter is for informational purposes only and solely intended to provide general information and should not be treated as legal advice, nor shall it be relied upon by any circumstance or create any relationship. All summaries of the laws, regulation and practice in the contents are subject to change. Specific legal advice should be sought by interested parties to address their particular circumstances.
If you have any question and/or wish to discuss further about the above or to discuss the impact of these legal and commercial developments in your particular case, please reach out to Sunu at sunu@sapartnerslaw.com and/or Tiara at ariza@sapartnerslaw.com.