In the second half of 2008, PT Profesional Telekomunikasi Indonesia (Protelindo) mandated ABN Amro, DBS Bank, Chinatrust, OCBC, Standard Chartered, CIMB, Bank Mandiri and Bank Central Asia, to arrange a floating rate term loan of $360 million in US dollars and $100 million-equivalent in Indonesian Rupiah. The financing – the largest telecoms tower financing in Indonesia to date – successfully combined international and local bank debt despite an uncertain domestic regulatory market for telecom operators and a dislocated global lending market.

Proceeds of the loan are being used by Protelindo to acquire a portfolio of wireless telecommunications infrastructure from Hutchison Telecom and also to refinance existing debt. In March 2008, Protelindo entered into a Tower Transfer Agreement to acquire up to 3,692 tower sites from Hutchison. Upon completing the acquisition, Protelindo will own and operate over 4,600 tower sites, making it the largest independent telecommunications tower company in Indonesia.

Protelindo's business model seeks to tap into the industry trend of wireless operators opting to co-locate their equipment on independently owned telecom towers, which allows for a significant reduction in capital expenditures and for faster installation of equipment and expanded coverage. Co-location also solves the problems caused by the increasing difficulty of getting permits to build new telecommunications towers, particularly in choice locations. Shiv Dave from PT Emerging Indonesian Business (Emindobiz), financial advisers to the transaction, says: "Protelindo has world class tower industry management in place and that comforted the bankers a lot."

One of the key reasons for the multi-currency facility was to provide a natural hedge to the borrowing plan (in line with the revenue mix of US Dollar and IDR), since a significant portion of Protelindo's revenues will be in US dollars. Given the tight US-dollar liquidity situation, having an IDR facility better enabled Protelindo to tap into local currency funding in Indonesia, widening the pool of liquidity available for the transaction. Local bank participation also helps in respect of risk perception for Indonesia.

The deal also features a $65 million mezzanine facility. The three layers of debt – a senior credit facility, a mezzanine credit facility and investor debt – required a complex set of intercreditor arrangements and unique security arrangements to make banks comfortable. "The timing of the deal, and its complexity made it very challenging; yet the three layers of debt showed the various support levels, from banks, mezzanine lenders and economic sponsors," adds Dave.

All in, Protelindo's tower financing is a benchmark transaction for the industry and the region, and demonstrates that there remains an appetite for quality Indonesian infrastructure assets in spite of current conditions in the financial markets.

Protelindo

Status: Financial close 5 December 2008
Description: $460 million senior debt facilities and $65 million mezzanine for acquisition of wireless telecoms towers and refinance existing debt
Sponsor: PT Profesional Telekomunikasi Indonesia
Lead arrangers: DBS Bank Ltd., Oversea-Chinese Banking Corporation Limited, RBS/ABN Amro; Bank Central Asia; Bank Mandiri; Standard Chartered; CIMB Bank Berhad; Chinatrust Commercial Bank
Financial adviser: Emerging Indonesian Business (Emindobiz)
Legal advisers to the sponsor: Milbank Tweed (English Law); Makes & Partners (Indonesian law)
Legal advisers to senior lenders: Latham & Watkins (English law); Hadiputranto Hadinoto & Partner (Indonesian law); TSMP Law (Singaporean law)
Legal adviser to mezzanine lenders: Allen & Overy
Telecoms consultant: Spectrum