On 19 November 2012, Margabumi Adhikaraya, a consortium led by state-owned toll operator Jasa Marga (53.85%) and also including Perusda Jalan Tol Pasuruan (24.47%), MBMR (19.80%) and Entrada Utama (1.88%), closed a roughly Rp1.202 billion ($124 million) project financing to support the construction of a new toll road between Gempol and Pandaan in the east Java region of Indonesia.

The project is one of a series of upgrades to transportation infrastructure in East Java, which is one of the most rapidly growing provinces in Indonesia, and the upgrades should help support further growth in the region. The sponsors were able to obtain a competitive financing structure, including 15-year tenor, limited support undertakings from the sponsors, and relatively cheap pricing.

The project entails the construction of a 22.7km new stretch of road running between Gempol and Pandaan under a 35-year build, operate and transfer concession. The new section is one of several projects designed to improve transportation links between the city of Surabaya and surrounding residential and industrial areas such as Gresik, Sidoarjo and Malang.

Gempol-Pandaan is in fact one of several sections of road that have been constructed, or are in the process of being constructed, between Surabaya and Malang. Jasa Marga built the first segment, a 42km stretch of road that runs between Gempol and Surabaya and has been in operation since 1986. The second segment, between Gempol and Malang, is split between the Gempol-Pandaan toll road and the Pandaan-Malang toll road concessions.

The toll road will meet up with the Gempol-Pasuruan highway, which is currently in construction, and the Pasuruan-Banyuwangi road. Construction has already started on Gempol-Pandaan and is due to be completed by December this year, although there is a possibility that the start of operations could be held back slightly because of a delay to construction of a new highway between Surabaya and Gempol.

The procuring authority, Badan Pengelola Jalan Tol, named Margabumi Adhikaraya as preferred bidder in June 2011, following a public tender, and the sponsors mandated Bank Mandiri in January the following year. The lead arranger then invited several regional banks to participate during a general syndication. The banks that joined the transaction were Bank DKI, Bank BJB and Bank Jatim.

The sponsors signed the financing in June last year and closed the financing in November after the deal fulfilled final conditions precedent. The deal is being financed through Rp817 million in project debt, which has a tenor of 15 years, including a 4-year grace period. The debt financing is split between two term facilities, a Rp698.6 billion term loan and a Rp118.4 billion tranche.

Bank tickets vary slightly between the different lenders and final allocations saw Bank Mandiri take the largest ticket, with Rp467 billion, followed by Bank DKI with Rp150 billion, and Bank BJB and Bank Jatim with Rp100 billion each. The financing is rounded off with Rp385.2 billion in equity from the sponsors.

The sponsors comprise Jasa Marga, the state-owned Indonesian toll road operator, MBR, a special purpose company that operates the Surabaya-Gresik toll road, Perusda Jalan Tol Pasuruan, the regional state-owned company that was formed by the regional government to boost investment in infrastructure and regional growth, and Entrada Umada, a private company formed in 2001.

The strength of the sponsor line up was one of the reasons that shareholders were able to achieve such attractive financing terms, including 15-year door-to-door financing, low leverage, and relatively cheap pricing, which was based on a margin of 525bp over 3-month ATD (the average time deposit benchmark rate). The support of several regional banks was also an important factor in obtaining such competitive terms.

The sponsors, however, are taking full traffic risk in the absence of any revenue guarantee from the government. The sponsors are also providing a corporate guarantee on the debt, which helped line up interest from lenders when Bank Mandiri approached the wider bank market in the first half of last year.

The Indonesian government has focused considerable infrastructure development attention on the areas surrounding§   Surabaya, which is an important hub for goods distribution and serves as a bridge between the western and eastern regions of the country. Its infrastructure initiatives focused on international lenders have had a more mixed record, and the MBAR financing suggests that projects that can attract cash-rich local developers may have a faster route to market. Its competitive financing package will certainly give local sponsors hope. 

PT Margabumi Adhikaraya
STATUS
Signed 12 June 2012, closed 19 November 2012
SIZE
Rp1.202 trillion
DESCRIPTION
Financing for the construction of a new toll road in East Java, Indonesia
GRANTOR
Badan Pengelola Jalan Tol
SPONSORS
Jasa Marga (53.85%), Persuda Jalan Tol Pasuruan (24.47%), MBMR (19.80%), Entrada Utama (1.88%)
MANDATED LEAD ARRANGER
Bank Mandiri (bookrunner, facility agent, security agent, escrow agent)
PARTICIPANTS
Bank Jatim, Bank DKI, Bank BJB
LENDERS’ LEGAL ADVISER
Widyawan & Partners